Key Takeaways
- Axon stock rebounded nearly 10% from its October 19 close but remains approximately 45% below its 52-week high.
- Raymond James maintained its Outperform rating but lowered its price target to $675, implying approximately 61% upside from Axon’s October 23 closing price.
- Second-quarter revenue grew 35%, outpacing Motorola Solutions’ 13% growth, although margin pressures remain a concern.
- Axon’s November 5 earnings report will test whether its growth and profitability can support a sustained recovery.
Axon Enterprise (AXON) has recovered sharply after a difficult stretch for shareholders.
Shares closed at $420.37 on October 23, rising nearly 10% from their October 19 closing price of $383.09. Despite that rebound, the stock remains approximately 45% below its 52-week high.
Raymond James recently reduced its price target from $800 to $675 while maintaining its Outperform rating, implying approximately 61% upside from the October 23 close.
The question for investors is whether Axon’s exceptional growth can justify a premium valuation as profitability faces increasing pressure.
What Happened to Axon Stock?
Axon’s selloff gained momentum on September 15 after the company announced a $1 billion offering of 0% convertible senior notes due in 2031.
Shares fell approximately 10% that session as investors weighed potential dilution and financing requirements.
Analyst price target reductions added pressure in October.
UBS lowered its target from $600 to $470 on October 13, maintaining its Hold rating. Raymond James followed on October 15, reducing its target to $675 from $800.
Axon also announced that the Department of Homeland Security selected its Dedrone counter-drone platform, although no contract value was disclosed.
Despite the announcement, Axon declined 6.5% on October 16, compared with a 2.1% decline in the Nasdaq Composite.
The stock’s subsequent rebound suggests that broader growth-stock weakness may have contributed to the selloff. Nevertheless, profitability and valuation concerns remain important.
Axon’s Revenue Growth Remains Strong, but Margins Matter
Axon reported second-quarter revenue of $904 million, representing 35% year-over-year growth.
That substantially outpaced Motorola Solutions (NYSE: MSI), which reported 13% revenue growth to approximately $3.1 billion during the same quarter.
Axon’s Software and Services revenue also grew 36%, compared with 10% growth in Motorola’s Software and Services segment. Although their business mixes differ, the comparison highlights Axon’s faster expansion.
However, profitability remains a concern.
Axon’s reported gross margin was 60.4%, while adjusted gross margin reached 62.9%, down 40 basis points year over year.
Software and Services adjusted gross margin also declined 380 basis points to 75.1%.
Higher memory costs for camera products could create additional pressure. CFO Brittany Bagley highlighted those costs at a September investor conference, with potential relief depending partly on additional industry capacity.
The longer-term margin trend reinforces those concerns.
According to TIKR data, Axon’s annual gross margin declined from approximately 62.7% in 2021 to 59.8% in 2025.
The original TIKR estimates anticipate margins recovering toward 61% in 2026 and approximately 63% by 2028, although those forecasts depend on improvements in pricing, costs, and product mix.
Axon also held approximately $600 million in cash against $1.85 billion in debt at the end of June, before its September convertible notes offering.
Management’s approximately $450 million full-year free cash flow outlook depends heavily on fourth-quarter performance.
For investors, Axon’s ability to translate rapid revenue growth into sustained profitability remains critical.
Wall Street Still Sees Significant Upside
Analysts have substantially reduced their price expectations over the past year.
According to TIKR’s October 14 data, Axon’s consensus price target declined from approximately $889 a year earlier to $691.
That historical $691 consensus target would imply approximately 64% upside from the October 23 closing price.
However, subsequent revisions may have changed the consensus.
For example, Piper Sandler reduced its price target from $732 to $561 on October 20.
Raymond James remains more optimistic with its $675 target, although the reductions suggest analysts are reassessing how much investors should pay for Axon’s growth.
The opportunity is meaningful, but reaching those targets depends on continued execution, stronger profitability, and improved investor confidence.
Is Axon Stock Undervalued After the Selloff?
Axon’s valuation has contracted considerably.
On October 16, shares traded at approximately 43.5 times next-twelve-month earnings, near their five-year low and substantially below the five-year average of approximately 77.5 times.
That compression makes Axon more attractive than it was at its previous valuation extremes, particularly with management forecasting 32% to 34% revenue growth in 2026.
However, a lower earnings multiple does not automatically mean a stock is undervalued.
Using the forward earnings estimate implied by the October 16 valuation snapshot, Raymond James’s $675 target would represent approximately 75 times earnings.
That is close to Axon’s historical five-year average, suggesting the target depends on substantial valuation expansion, future earnings growth, or a combination of both.
This is an illustrative comparison using October 16 forward earnings expectations, not a forecast of Axon’s earnings multiple when the stock reaches $675.
The next important catalyst is Axon’s third-quarter earnings report on November 5.
The October 19 draft’s consensus estimates indicate approximately $939 million in revenue and $232 million in EBITDA for the quarter, implying a margin near 25%.
Those estimates make profitability particularly important, especially given management’s 25.5% full-year adjusted EBITDA margin guidance. The EBITDA measures must be compared on a consistent basis.
My take: Axon looks more attractive following its valuation reset, but Raymond James’s full $675 target remains ambitious.
Its faster growth relative to Motorola Solutions supports the long-term investment case, but narrowing margins and financing requirements make the opportunity less straightforward.
I lean cautiously bullish on Axon for patient investors. However, a sustained recovery will likely require stronger profitability, solid cash generation, and continued revenue growth.
The November 5 earnings report should provide an important test of that outlook.
So what is Axon stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
