What happened

On a bright green day for the stock market -- the Dow is up 2%, and the tech-heavy Nasdaq is up 1.2% -- shares of one tech stock are looking particularly red this afternoon.

As of 1:45 p.m. ET, Axon Enterprise (AXON -1.27%) is down 5.1%, and you can blame Morgan Stanley for that.

Simple red arrow declining stock chart on a white checked background.

Image source: Getty Images.

So what

Morgan Stanley switched its coverage of Axon from one analyst to another, and the new Axon specialist, Erik Lapinski, took the opportunity to downgrade the bank's rating on Axon to equal weight (not quite a sell, but not buy anymore, either), reports The Fly today.  

Morgan Stanley didn't have anything particularly negative to say about Axon, though. To the contrary, Lapinski is "highly encouraged" about new software product offerings coming out of Axon, at the same time as Axon itself announced that it's integrating drone live-streams from partner Skydio drones to give command staff and 911 dispatchers yet another viewpoint from which to observe public safety incidents as they happen.  

What's more, while Morgan Stanley's rating came down, the bank maintained its $120 price target on Axon -- a price target that implies Axon stock could go up as much as 27% over the course of the next year!

Now what

And yet Morgan Stanley doesn't think a 27% potential profit is worth a buy rating. I don't know about you, but that sounds a bit strange to me.

On the one hand, Axon stock is down 23% over the past year, which may have the banker hoping for a bounce. On the other hand, though, Axon stock really doesn't look cheap enough to be a good bounce candidate.

Valued at $6.7 billion currently, Axon boasts all of $51 million in trailing free cash flow -- and just $43 million in trailing earnings under generally accepted accounting principles (GAAP). That works out to a price-to-free cash flow ratio of 131 -- and a price-to-earnings ratio of 155. These are very high multiples to pay for a stock that, in the opinion of most analysts who cover it, won't grow earnings much faster than 15% annually over the next five years.

If you ask me, Morgan Stanley's $120 price target on Axon is far too high for a stock that already looks overvalued. After Axon's rating got downgraded today, I expect Axon's price target will be the next thing to fall.