Axon (AXON): Reassessing Valuation After AI Expansion, New Contracts and Analyst Price Target Cuts

Axon Enterprise (AXON) is back in focus after shares climbed about 3% as investors reacted to fresh law enforcement contracts, an expanded AI footprint through the Prepared acquisition, and ongoing strength in its Software and Services business.

See our latest analysis for Axon Enterprise.

Zooming out, Axon’s latest contracts and AI push arrive after a choppy stretch, with a roughly flat year to date share price return but a powerful three year total shareholder return above 200 percent. This suggests long term momentum is intact even as short term volatility reflects shifting risk appetite.

If Axon’s move into AI enhanced public safety has your attention, this could be the moment to explore other high growth tech names via high growth tech and AI stocks.

So with Axon delivering rapid revenue growth, trading well below consensus targets, yet already rewarded with a premium long term rerating, is this latest pullback a fresh entry point, or is the market already pricing in years of expansion?

Most Popular Narrative: 31.5% Undervalued

With Axon Enterprise’s fair value pegged well above the last close at $563.28, the dominant narrative leans toward sizable upside from here.

Analysts are assuming Axon Enterprise's revenue will grow by 24.3% annually over the next 3 years.

Analysts assume that profit margins will shrink from 13.6% today to 10.4% in 3 years time.

Read the complete narrative.

Want to see why rich growth expectations can still coexist with thinner margins and a towering future earnings multiple? The narrative’s valuation hinges on that tension. Curious how those moving parts combine to justify a premium price tag far above today’s level? Dive in to unpack the full set of assumptions driving this fair value.

Result: Fair Value of $822.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Axon’s reliance on government budgets, along with growing regulatory scrutiny of AI driven surveillance, could quickly challenge today’s bullish growth and valuation assumptions.

Find out about the key risks to this Axon Enterprise narrative.

Another Angle on Valuation

While the narrative points to Axon as materially undervalued, our SWS DCF model paints a cooler picture. On that view, Axon looks expensive, with shares trading above an intrinsic value closer to $400, raising the question of whether optimism around AI and drones has run too far ahead.

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Axon Enterprise Narrative

If you see the story differently, or want to stress test the numbers yourself, you can build a personalized Axon view in just a few minutes, starting with Do it your way.

A great starting point for your Axon Enterprise research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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