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Northcoast Research downgraded Axon Enterprise (AXON, Financials) due to rising competition from Flock Safety, a company that Axon previously invested in but now operates as a direct competitor in key markets.
Leader in public safety technologies Axon made investments in Flock Safety in 2020 hoping to maintain its leadership in the automated license plate reader market. But Flock has since grown its company and now faces direct competition from Axon in the ALPR, drone technology, and real-time crime center areas, therefore casting questions over Axon's market leadership.
As Axon negotiates this unanticipated competition, Northcoast analysts Keith Housum and Rodney McFall pointed out that the competitive change might momentarily divert Axon's leadership. The analysts also raised valuation issues, noting that Axon's stock price dropped to a neutral rating after it surpassed the firm's price objective.
The company also underlined uncertainties over Axon's financial situation, particularly expectations for fiscal 2025 direction. Northcoast voiced uncertainty about the company's capacity to reach such projections, which would cause the stock to be under pressure from below in the next quarters.
Axon shares dropped substantially on the downgrade and worries about competitiveness, plunging 16.4% on Wednesday to end at $593.42, a $116.59 decrease. On Thursday, the sell-off moved into pre-market trading; the stock dropped another 1.9% to $581.89 as investor worries about future prospects continued.
This article first appeared on GuruFocus.