In the ever-evolving landscape of growth stocks, several companies have recently caught the attention of Wall Street analysts due to their promising performance and potential for future expansion. Specifically, Shopify (NYSE: SHOP) and Axon Enterprise (NASDAQ: AXON) have both received positive upgrades that could attract investor interest.
As of now, Shopify’s stock price has seen a slight decline of 4% this year, contrasting sharply with Axon’s impressive 48% increase. Just recently, analysts have raised their price forecasts for both companies, hinting at an optimistic outlook for their shares. Notably, on September 17, analyst Dominic Ball of Redburn Atlantic elevated Shopify’s rating from neutral to buy and set a price target of $99 per share, suggesting a potential upside of 32% from its current level of around $75. On the other hand, Axon’s price target was adjusted to $430 by Trevor Walsh at JMP Securities, indicating a 12% upside from its current price of $383.
Let’s delve into what makes these two firms particularly noteworthy for investors.
Exploring Shopify’s Potential
Shopify is a comprehensive commerce platform designed to empower merchants in managing their sales effectively across both online and physical storefronts. From social media to custom websites, Shopify’s robust system enhances the e-commerce experience while also offering vital services such as payment processing, logistics, and marketing software.
A recent report from research leader Gartner has recognized Shopify as a frontrunner in the digital commerce space, praising its extensive capabilities and consistent innovation. Forrester Research echoed these sentiments, recognizing Shopify’s prowess in wholesale commerce, particularly its expansive functionalities and artificial intelligence tools.
In its recent second-quarter earnings report, Shopify demonstrated resilience with a revenue increase of 21% year over year, totaling $2 billion. This growth stemmed from strong performance in subscription software and merchant services, with non-GAAP earnings soaring 85% to $0.26 per share. Analysts predict that Shopify’s adjusted earnings will grow at a rate of 25% annually through 2026, making its current valuation of 73 times adjusted earnings seem justifiable given its 10% retail e-commerce market share in the U.S. and the vast $849 billion addressable market.
Investors considering Shopify should contemplate establishing a modest position, taking advantage of potential price corrections to build a larger stake through dollar-cost averaging.
Axon Enterprise: A Leader in Public Safety Solutions
Axon Enterprise stands out as a trusted provider of cutting-edge hardware and software solutions for law enforcement and public safety agencies. Best known for its conducted energy devices, including Tasers and body cameras, Axon also integrates its offerings with software solutions for digital evidence management and operational reporting.
With a solid reputation in the public sector, Axon has secured a large customer base among state and local law enforcement agencies, which bolsters its market leadership in both body cameras and associated software services.
In its latest second-quarter report, Axon reported a remarkable 34% revenue growth, hitting $504 million, buoyed by substantial gains in software and service sales. While operating expenses increased by 41%, the company views this as a necessary investment in product development aimed at sustaining its competitive edge. One notable introduction is their generative AI service, Draft One, which uses video data from body cameras to aid in police report preparation—a feature that has garnered positive feedback from its users.
Future earnings projections estimate a 20% annual increase for Axon’s adjusted earnings through 2025, justifying its 85 times earnings valuation. As Axon taps into a potentially lucrative $77 billion addressable market, patient investors may find value in initiating a position while awaiting opportunities for scaling their investments.
Conclusion: Investing in Growth
The market for growth stocks is ripe with opportunities, and both Shopify and Axon have positioned themselves as strong contenders in their respective industries. With favorable upgrades and promising earnings potential, these companies are worth considering for investors seeking to expand their portfolios. Whether looking to capitalize on e-commerce advancements or public safety innovations, now may be a strategic time to engage with these market leaders.
Before making investment decisions, it’s important to conduct thorough research and consider your financial goals, as market conditions can shift. By remaining informed and proactive, investors can navigate this dynamic environment successfully.