What happened
Shares of Axon Enterprise (AXON -4.55%) took it on the chin on Wednesday despite a solid earnings report, as investors fretted about future growth rates. Overnight, a number of Wall Street analysts defended the stock, and investors are apparently giving the shares a second look.
Axon shares traded up as much as 6% on Thursday morning following an upgrade and a number of price target boosts.
So what
Axon makes hardware and software for law enforcement agencies, including the Taser device. The company's first-quarter results seemed solid, as Axon easily beat on both earnings and revenue and raised its full-year guidance for sales.
But this is a stock that carries a premium valuation, trading at more than 13 times sales. That implies there is a lot of future growth priced into the shares, and Axon's future contract revenue suggested to some investors that growth might slow up ahead.
After markets closed Wednesday, several analysts chimed in with more upbeat analysis. At least three banks raised their price targets on Axon shares, with one setting a target more than 50% above the current price.
Axon was also upgraded to overweight from neutral at JPMorgan. Analyst Paul Chung advised investors to take advantage of Wednesday's decline, arguing that the growth numbers should improve as a new generation of Tasers hits the market.
Now what
Axon is both an impressive growth story and a highly valued stock. That is often a recipe for volatility, as investors have experienced in recent days.
For those who can handle the ups and downs, there remains a lot to like about Axon. The company has strong, growing relationships with law enforcement agencies worldwide and is growing its subscription revenue thanks to its evidence collection and tracking platforms. But stocks like this hardly ever travel in a straight line, as investors have been reminded this week.
