Shares of Axon Enterprise (NASDAQ: AXON) stock -- maker of Taser stunguns and Axon body cameras for police -- jumped 5% through 10:35 a.m. ET Thursday morning.
You can thank JMP Securities for that. This morning, StreetInsider reported that JMP analyst Trevor Walsh raised his price target on Axon stock by $55, to $430 per share, and reiterated its prediction of market outperform (i.e., buy).
Why Wall Street loves Axon
In fact, this was the week's second price target hike for Axon stock. On Tuesday, Baird analyst William Power also raised his price target Axon stock, to $400. Like JMP's Walsh, Baird's Power predicts Axon stock will outperform the market, and recommends buying the stock.
What's got Wall Street so enthusiastic about Axon?
Turns out, Axon has been meeting with analysts this week to tell its story. The analysts are coming away impressed by (says Power) "strong growth from core Taser 10, body camera 4 and [especially] software [which] alone grew 47% YOY in Q2" and now accounts for nearly $800 million of the company's annual revenue.
As my colleague Josh Kohn-Lindquist reported last month, Axon grew total sales 35% in its fiscal Q2, but its Draft One artificial intelligence software tools in particular grew sales 70% -- twice as fast as companywide sales.
Is Axon stock a buy?
Yes, you read that right: Axon Enterprise is now an artificial intelligence stock, and with all the enthusiasm that entails on Wall Street. And yet, with that new moniker comes risk.
On the one hand, the AI revolution appears to be helping accelerate Axon's already superb revenue growth rate (it's averaged 32% annual revenue growth over the last five years, according to data from S&P Global Market Intelligence) -- and now it appears to be reaching for 70%! On the other hand, Axon is not a cheap stock, selling for 94 times trailing earnings, and for a staggering 134 times free cash flow.
While the stock clearly has momentum on its side today, beware if that growth rate ever slows. The first step down could be a doozy.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise. The Motley Fool has a disclosure policy.
