Weapons technology company Axon Enterprise Inc. AAXN reported a third-quarter earnings and sales beat Tuesday. Despite a surge in net income and a revenue increase of roughly 16 percent, the stock fell substantially following the report.
The Analyst
JPMorgan analyst Mark Strouse upgraded Axon from Neutral to Overweight and maintained a $68 price target.
The Thesis
Axon’s reported guidance implies a dip in revenue growth in the fourth quarter, Strouse said in a Thursday note. (See his track record here.)
The dip should be a temporary one, the analyst said.
“The stock is now below the price of the May secondary offering, despite recent developments that we believe are long-term positives such as the launch of the TASER 7 and Axon Body 3, new officer safety payment plans with enhanced features and premium pricing, as well as being in closer proximity to the launch of Axon Records in mid-2019.”
Strouse expects that certain agencies will pause before deciding whether to buy older Tasers or the new TASER 7 in 2019. Contact announcements should demonstrate signs of progress and growth acceleration into 2019, he said.
"We believe AAXN's uniquely strong position in a large addressable market, solid revenue growth momentum and improving EBITDA margins could provide upside to estimates over time."
Price Action
Axon shares rose 4.95 percent to $53.21 during pre-market trading on Thursday. The stock had dipped over 15 percent following Wednesday’s close.
Related Links:
Analyst: The Bullish Case For Axon Isn't Based On Taser Sales Alone
Raymond James: Axon Still Underappreciated After 170% Pop
Photo courtesy of Axon.
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