Wall Street analysts are showing increasing optimism towards Shopify and Axon Enterprise.
Shares of Shopify (SHOP) and Axon Enterprise (AXON) have experienced divergent movements this year. Shopify’s shares have declined by 4%, while Axon Enterprise’s shares have surged by 48%. Despite these contrasting performances, Wall Street analysts have recently raised the price targets for both companies.
On September 17, Dominic Ball at Redburn Atlantic upgraded Shopify from neutral to buy, setting a new price target of $99 per share. This revision suggests a 32% potential increase from Shopify’s current share price of $75.
On September 12, Trevor Walsh at JMP Securities raised his price target for Axon Enterprise to $430 per share, indicating a 12% potential increase from its current share price of $383.
### 1. Shopify
Shopify offers a comprehensive commerce platform that enables merchants to manage their sales and inventory across various channels, including physical and digital storefronts, online marketplaces, social media, and custom websites. The platform also includes ancillary services such as payment processing, logistics, and marketing software.
Research firm Gartner has identified Shopify as a leader in its latest digital commerce report, highlighting its robust functionality for both retail and wholesale operations, its momentum with larger merchants, and its rapid innovation. Similarly, Forrester Research has recognized Shopify as a leader in wholesale commerce, noting its broad capabilities and advanced artificial intelligence (AI) tools.
In the second quarter, Shopify reported strong financial results, with revenue growing by 21% to $2 billion, driven by significant growth in subscription software and merchant services. Non-GAAP earnings also increased by 85% to $0.26 per diluted share. This growth was particularly strong among large, international, and offline merchants, which are key focus areas for Shopify.
Wall Street projects that Shopify’s adjusted earnings will grow at an annual rate of 25% through 2026. Although Shopify’s current valuation of 73 times adjusted earnings may seem high, the company’s sizable market share in the U.S. and Western Europe and its access to an $849 billion addressable market justify the premium valuation.
Investors who are patient may consider starting with a small position in Shopify, and if there is a price pullback, they can build a larger position through dollar-cost averaging.
### 2. Axon Enterprise
Axon Enterprise specializes in public safety, providing hardware and software solutions to law enforcement, federal agencies, and commercial enterprises. Its product portfolio includes conducted energy devices (Tasers), body cameras, and in-car cameras, all of which integrate with its software for digital evidence management, report writing, and real-time operations.
Axon leads the market for conducted energy devices to the extent that the Taser brand has become synonymous with the product category. The company maintains strong relationships with numerous state and local law enforcement agencies in the U.S., which has helped it establish a dominant position in body cameras and digital evidence management software.
In the second quarter, Axon reported a 34% increase in revenue to $504 million, largely due to robust growth in software and services sales. Non-GAAP net income rose by 9% to $1.20 per diluted share. However, operating expenses increased by 41%, which affected the bottom line, as the company is investing heavily in product development to bolster its market leadership.
Recently, Axon introduced a generative AI service called Draft One, which uses video data from Axon body cameras to draft police reports. According to CEO Rick Smith, customer response to Draft One has been overwhelmingly positive, and Axon aims to lead the public safety generative AI software sector due to its extensive sensor ecosystem and robust data.
Wall Street forecasts Axon’s adjusted earnings will grow at an annual rate of 20% through 2025. Despite a current valuation of 85 times earnings, investors are likely to pay a premium to invest in Axon due to its leadership in core product categories and its significant $77 billion addressable market.
Investors may consider buying a small position in Axon, with the expectation that any future price pullback could provide an opportunity to expand their holdings.
Trevor Jennewine holds positions in both Axon Enterprise and Shopify. The Motley Fool has positions in and recommends Axon Enterprise, Shopify, and Gartner. The Motley Fool follows a disclosure policy.
