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Raymond James downgraded Axon Enterprise (NASDAQ:AXON) to an Outperform rating (from Strong Buy) and reiterated a $223.00 price target on the stock as analysts search for a near term positive catalyst.
Analysts wrote in a note, “While execution has been nearly flawless during this period (and we expect a strong 4Q report 2/28), the inevitability of mean reversion vs other software stocks, decelerating growth off of a larger base and less room for multiple expansion leave us searching for a near term positive catalyst. At the same time, TASER 10 could create some near term topline and margin choppiness before it earns a spot as a flagship product. Longer term, our enthusiasm for TASER 10 and Axon’s broader technology suite to aid police reform and minimize loss of life remains unwavering.”
The new TASER 10 expands on many of the capabilities that are most critical to end users, including # of shots, stand-off distance, and efficacy. In the near term, demand for the product could stress production capabilities disrupt TASER revenue and gross margin momentum, limiting the likelihood/magnitude of earnings momentum carrying forward in 2023.
When compared to other government public safety/tech plays, such as TYL and MSI, AXON’s EV/Sales and EV/EBITDA are currently at a 30% and 60% premium vs TYL. Axon is also trading at a 3 fold sales premium and almost 2 times EV/EBITDA premium vs MSI. The analysts firmly believe Axon is deserving of a premium to both names though the widening variance from historical norms should serve as a governor for further sustainable expansion.
Shares of AXON are down 3.72% in afternoon trading on Friday.
