2 magnificent growth stocks have just been upgraded by Wall Street analysts to buy now

Actions of Shopify (NYSE: STORE) and Axon Enterprise (NASDAQ: AXON) they moved in opposite directions this year. The former fell 4%, while the latter gained 48%. Both stocks recently had their price targets raised by Wall Street analysts.

On September 17, Redburn Atlantic’s Dominic Ball upgraded Shopify from neutral to buy and raised his price target to $99 per share. This forecast implies a 32% premium to the company’s current share price of $75.

On September 12, JMP Securities’ Trevor Walsh raised his price target for Axon Enterprise to $430 per share. This forecast implies a 12% upside from the current share price of $383.

Here’s what investors should know about Shopify and Axon.

1. Shopify

Shopify offers a turnkey solution for commerce. Its platform helps retailers manage sales and inventory across physical and digital storefronts, including online marketplaces, social media and custom websites. Shopify also offers adjacent business services such as payment processing software, logistics and marketing.

Research company Gartner recognized Shopify as a leader in its latest digital commerce report. Analysts cited robust retail and wholesale functionality, momentum with larger retailers and rapid innovation as key strengths. Similarly, Forrester Research recognized Shopify as a leader in its latest wholesale report, citing its broad capabilities and artificial intelligence (AI) tools as key differentiators.

Shopify reported strong financial results in the second quarter despite the uncertain economic environment. Revenue rose 21% to $2 billion, driven by strong sales growth in subscription software and commercial services. Meanwhile, non-GAAP earnings rose 85% to $0.26 per diluted share. The timing with large, international and offline merchants — three areas where Shopify has focused its resources — has been particularly encouraging.

Wall Street expects Shopify’s adjusted earnings to grow 25% annually through 2026. That consensus estimate makes the current valuation of 73 times adjusted earnings look a little expensive, but Shopify warrants a premium. Its e-retail market share is 10 percent in the U.S. and 6 percent in Western Europe, and it has barely tapped into what management sees as an addressable market of $849 billion.

Patient investors can consider buying a small position in Shopify stock today. If the stock pulls back, use the opportunity to build a larger position by dollar cost averaging.

2. Axon Enterprise

Axon is a public safety company that sells hardware and software to law enforcement, federal agencies and commercial enterprises. Its portfolio includes conducted energy devices (Tasers), body cameras and in-car cameras that integrate with its software for digital evidence management, report writing and real-time operations.

The story continues

Axon has long dominated the conducted energy device market — so much so that the Taser brand name has become synonymous with the product category. As a result, the company has a customer relationship with a “substantial number of state and local law enforcement agencies in the United States.” This has helped Axon secure a leadership position in body cameras and digital evidence management software.

Axon reported strong financial results in the second quarter. Revenue rose 34% to $504 million, driven by particularly strong software and services sales growth, and non-GAAP net income rose 9% to $1.20 per diluted share. The only concerning measure was a 41% increase in operating expenses, which dragged on profits, but Axon is spending money on product development that should strengthen its market leadership.

For example, the company recently introduced a generative AI service called Draft One, which uses video data from Axon body cameras to draft police reports. CEO Rick Smith recently told analysts, “Our customer response to Draft One is better than anything we’ve seen.” He also expressed confidence that Axon will define the public safety category of generative AI software because it has the largest ecosystem of sensors and therefore the most robust data.

Wall Street expects Axon’s adjusted earnings to grow 20% annually through 2025. That consensus estimate makes the current valuation of 85 times earnings look expensive, but investors will likely have to pay a premium to own a piece of this company. Axon is a leader in its core product categories, and the company has struggled to tap into what management sees as a $77 billion addressable market.

Patient investors should consider buying a small position today. The stock is likely to pull back at some point, and investors can use this opportunity to build a large position.

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Trevor Jennewine has positions in Axon Enterprise and Shopify. The Motley Fool has positions in and recommends Axon Enterprise and Shopify. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

2 Magnificent Growth Stocks Just Upgraded by Wall Street Analysts to Buy Now was originally published by The Motley Fool