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Axon Enterprise (AXON) is tumbling 12% after investment bank Craig-Hallum downgraded its rating on the shares to Hold from Buy. Axon sells Taser weapons and markets software to law-enforcement agencies.
Why Craig-Hallum Cut Its Rating on AXON
After Axon's shares surged 93% over the last year, Craig-Hallum believes that the shares' risk-reward ratio is balanced. Noting that AXON was changing hands at a forward price-to-revenue ratio of 17 times and a price-to-earnings ratio of 153.6 times heading into today, the investment bank believes that the company has little room for mistakes when it comes to managing itself.
A technician in a white coat testing an in-car system on a modern military vehicle.
Craig-Hallum Remains Bullish on AXON's Fundamentals
In conjunction with its downgrade of AXON, Craig-Hallum actually increased its price target on the shares to $625. Further, the investment bank expects the company to report that it attained record quarterly bookings when it delivers its Q4 results on Feb 25. What's more, the company has high gross margins of over 60% and the cash on its balance sheet is worth more than its debt.
More Information About AXON Stock
Analysts on average expect Axon's earnings per share to climb to $6.32 this year from $5.25 in 2024.
In the last month, the shares have dropped 14%, while they are down 16% in the last three months.
While we acknowledge the potential of AXON, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AXON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.