We're Ringing the Register on This Position Once Again
We are also downgrading our rating following the pronounced move and extended valuation.
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| Symbol | Transaction Type | # Shares Traded | Recent Price $ | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
AXON | Sell | 100 | 439 | 280 | 2.5 |
After you receive this Alert, we will sell 100 shares of Axon Enterprise AXON at or near $439 and downgrade the remaining position to a Three rating from Two. Following the trade, AXON shares will account for roughly 2.5% of the portfolio.
We have continued to watch the portfolio's position in Axon move higher, climbing more than 20% since early September and far more from when they traded near $280 in early August. To say the shares have been a champ would be an understatement. What is a bit concerning, however, is the surge higher in recent weeks comes without a corresponding increase in consensus EPS projections for this year or next, or any price target revisions save for our recent increase to $415.
Granted, public safety appears to be a bipartisan issue in the 2024 presidential election and Axon’s mix shift toward cloud should drive further margin expansion, but when we match that up against the move in the shares and stock’s valuation, it’s leading us to take some additional shares off the table. At the current share price, AXON is trading at 75x expected 2025 EPS and at a P/E-to-growth multiple near 3.6x. The stretched market valuation and investor sentiment knocking on “Extreme Greed” also weigh in favor of taking prudent action.
With the next known catalyst we see being quarterly earnings from Motorola Solutions MSI, which has yet to share that reporting date, and the shares above our $415 price target (consensus is at $380), we will also downgrade the shares to a Three rating. In keeping with the portfolio's description of a Three rating, we are waiting for a fresh catalyst to emerge to determine our next move. Earlier this year, we downgraded United Rentals URI to a Three and eventually revised that rating higher when the Fed delivered a larger-than-expected rate cut.
Should events develop that warrant us to raise our AXON price target high enough to warrant a revised rating then that is what we’ll do. On the other hand, should we see signs brewing for a potential AXON drop, we may elect to lock in more of the position’s profits.
All in all, this move is in keeping with two things — being a prudent investor, and not falling in love with your holdings.
More Pro Portfolio:
- Why We Opened a Position in a $8.4 Billion AI Name
- Weekly Roundup: Portfolio Begins October With Big Gains and Big Moves
- We Did the Homework for You: Here're the Top Stories on Our Investing Themes
At the time of publication, TheStreet Pro Portfolio was long AXON and URI.
(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.)
