Axon Enterprises stock price has retreated for four consecutive weeks as investors started to take profits after having its best year on record. AXON dropped to the key support at $600, down by 15% from its highest level in 2023. So, will the rally continue or will it suffer a harsh reversal this year?
Why Axon Enterprises stock jumped
Axon Enterprises is one of the best-performing companies in the United States, moving from $1.75 in 2001 to $600 today.
This performance was mainly due to its strong revenue growth, which occurred as security demands rose in the US and other countries.
Most recently, its annual revenue soared from over $530 million in 2019 to over $1.94 billion in the trailing twelve months (TTM). It has also become a highly profitable company as it moved from a net loss of $60 million in 2021 to a profit of $297 million in the TTM.
For starters, Axon Enterprises is a leading company that provides solutions to law enforcement agencies in the US and other countries. It is the biggest provider of tasers widely used by the police.
Axon also provides software and sensors that help agencies to capture, store, and analyze video. In addition to tasers the firm also sells body cameras, which are required by law in the United States. It sells its solutions to local governments, the federal government, and private security companies.
Axon’s growth is continuing
The most recent financial results showed that Axon’s business was still doing well. The numbers showed that its revenue rose by 32% in the third quarter to over $544 million, which was higher than its previous guidance and what analysts were expecting.
Strong product demand and software solutions have helped drive this growth. In the last quarter, its annual recurring revenue rose by 36% to $885 million. The company hopes that incorporating artificial intelligence will help supercharge its growth.
Axon’s growth has also been because of its Axon Air solutions, including drone services. Its drones are used by the military, first responders, and other non-governmental agencies. The recent decision by the US to ban DJI drones has supported its recovery.
Altogether, Axon is in fast-growing industries as crime rates and natural disasters continue rising.
The challenge, however, is that Axon has become a highly expensive company as its market cap surged to over $45 billion. It has a forward PE ratio of 115, making it a more expensive company than NVIDIA and Microsoft.
This valuation is because the company has sold the AI and robotics narrative. The stock is also slightly higher than the average analyst estimate of $601.
Most analysts have a bullish view of the company, with Morgan Stanley’s view being overweight. Baird, JMP Securities, and Northland Capital have outperform ratings.
Axon Enterprise stock price analysis
Axon Enterprise chart by TradingView
The daily chart shows that the Axon share price peaked at $695 in December and then pulled back to $600.
On the positive side,it has remained above the 50-day Exponential Moving Average (EMA), a sign that the bullish momentum is intact.
However, the two lines of the MACD have formed a bearish crossover, with the histogram being below zero. Also, the Relative Strength Index (RSI) has moved below the support at 50.
The other negative is that it has formed a head and shoulders-like pattern, a popular bearish sign. Therefore, after a strong performance in 2024, and with the stock being at unjustifiable levels, there is a likelihood that the stock will pullback this year, possibly moving to $500.
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