Here's Our Axon Strategy and What Keeps Us Bullish on the Stock
The post-earnings pop may fade, as short interest covering subsides.
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Circling back to our price target increase this morning on shares of Axon Enterprise AXON to $860, the post-earnings pop in the shares is leading us to keep our Two rating in place. Part of what’s fueling that pop is the beat-and-raise quarter posted by the company, but also the ensuing short-covering we are likely seeing. According to data from Nasdaq, as of July 15, short interest in AXON shares tallied more than 1.5 million shares, equating to 2.4 days to cover that interest.
Most likely this means we could see AXON give back some of their gains in the next few days. From our perspective, the positive mix shift toward the higher-margin recurring revenue Software & Services segment and their near 79% gross margin vs. the 51% margin for the Connected Devices segment continues to unfold, fueled by continued gains in annual recurring revenue and rising future contracted backlog levels. Ending the June 2025 quarter, those figures stood at $1.2 billion and $10.7 billion, respectively.
As we often mention, a Two rating is not a reason to sell the shares, especially given Axon’s $10.7 billion multi-year backlog vs. the $2.7 billion in revenue expected for this year. Rather, it means waiting for a pullback to put fresh capital to work in AXON or the emergence of fresh catalysts or new data points that foster yet another upward revision in our price target. When Axon management presents at the Goldman Sachs Communicopia & Technology Conference on September 9, what management shares about AI traction could be such a catalyst.
At the time of publication, TheStreet Pro Portfolio was long AXON.
