We're Closing Out This High-Flying Position With a Triple-Digit Gain
As a short squeeze further extends the shares, we’ll place them in the Bullpen for future consideration.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
AXON | Sell | 280 | 535 | 0 | 0 |
After you receive this Alert, we will sell the remaining 280 shares of Axon Enterprise AXON in the portfolio at or near $535. Following the trade of this final slug of Three-rated AXON, which returned more than 147%, the portfolio will have no position in the stock.
While Axon delivered a beat-and-raise quarter Thursday night, the response we are seeing in the shares is an extreme move, and that is prompting us to lock in massive gains. Much like the move we saw in the Dutch Bros BROS Thursday, Friday’s post-earnings pop is being fueled in part by short covering.
According to the latest data published by Nasdaq, heading into Axon’s earnings call there were 2.46 million shares short AXON, and based on the average daily trading volume of just under 600,000 shares that equates to just over four days of trading to cover. Odds are we will see far more shares than usual traded Friday as those short investors look to cover their positions in a bid to minimize their losses.
That bidding up to cover, if history holds, will fade just like we’re seeing with BROS shares Thursday, which reached a high of $50.24 before closing the day at $44.77. As you saw, we took advantage of that BROS opportunity to lock in a slice of gains at $48.04 and downgraded them to a Two rating, recognizing they are likely to settle out further. As that happens, we’ll revisit potential re-entry points given our new price target of $50.
With AXON, while we do see further gains in the company’s business ahead, the shares have already put in a huge rally since their August 5 low at $279. That’s before Friday’s short squeeze pops them even higher, putting them past post-earnings price target revisions near $530 Friday morning from the likes of JPMorgan. While we like the company’s business, as investors we have to recognize this makes an already stretched valuation even more so and tips the scales more to risk than reward in the near term.
All this is leading us to close out the portfolio’s AXON position at lofty levels, booking a wonderful gain for the portfolio against our $216.76 cost basis. As we make that move, we will place the shares in the Bullpen to revisit should they settle out and offer a more favorable risk-to-reward entry point for the portfolio and members.
The returned capital will build up our cash position, which will bring additional firepower for us to use opportunistically down the road.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to click on Closed Trade Gain/Loss and toggle the chart to sort by Purchase Date.)
At the time of publication, TheStreet Pro Portfolio was long AXON and BROS.
