Axon Enterprise could be set up for continued gains in the months ahead, according to Morgan Stanley. Analyst Meta Marshall upgraded the stock to overweight, and her price target of $700 reflects about 10% upside from Monday’s close. This comes as the stock has risen more than 146% year to date. AXON YTD mountain AXON, year-to-date In its latest earnings report, the company known for law enforcement tools such as the Taser and body cameras said it has seen more than 30% annual revenue growth in each of the first three quarters this year and more than 25% growth for 11 quarters in a row. Taking that into account, Marshall believes the company’s growth is “durable.” “We have increasing confidence that the ~25-30% growth AXON is seeing is durable as software continues to become a growing portion of the model,” the analyst said in a Tuesday note to clients. “While the name is expensive and may need to grow into valuation given run YTD, over the long term, we see it as a core holding.” While Marshall believes that Axon – which has a forward price-to-earnings ratio of 124.5, according to FactSet – has a “very big hurdle” with its valuation, its free-cash-flow margins and operating profile are becoming more attractive, as it’s now in-line with its high growth peers. On top of that, the analyst also pointed to artificial intelligence as providing an opportunity for the company to upsell users to more premium bundles. This could drive more total addressable market recognition and ultimately support more growth ahead, she said. “As a result, we are more willing to ascribe value to AI portfolio pulling through other products, which could lead to additional valuation upside (as prelim AI portfolio pull through is likely built into price after recent run),” Marshall continued. Marshall’s call joins the majority on Wall Street that have a bullish stance on the name. Among the 16 analysts covering it, 14 have a strong buy or buy rating, while the remaining two have a hold rating. That said, its average target implies 13% downside from here, as of Monday’s close. Following the move, shares of Axon were about 2% higher Tuesday, touching an all-time high.
