Axon Enterprise (NASDAQ:AAXN) share price grew more than 130% since the start of this year to $63 a share at present. The stunning rally in AAXN share price is contributed by record financial numbers for the first quarter and higher than expected guidance for the full year. Some traders, however, are of the opinion that the rally in share price presents an attractive time to sell Axon Enterprise shares, particularly for short-term value investors.
JP Morgan, who was bullish on Axon Enterprise, has recently downgraded its rating from Overweight to Neutral, saying that the rally in AAXN shares has increased its valuations significantly compared to the industry average.
It’s true that Axon Enterprise shares are trading at significantly higher valuations than the industry average. AAXN shares are trading around 400 times to earnings and 9 times to book value, whereas the industry average hovers around only 20 times to earnings and 3 times to book ratio. Its price to sales ratio of 6 is considerably higher than the industry average of 2 times to sales.
Is This the Time to Sell Axon Enterprise Shares?
Although its financial numbers are increasing at a robust pace, the growth in financial numbers is still less than the increase in its share price. This is because its valuations are higher than the industry average, which is an indication that the stock is overvalued.
The year-to-date rally of 130% in share price suggests short-term value investors sell Axon Enterprise shares; the long-term investors can hold this stock – as Axon Enterprise is well set to generate record financial numbers this year. JPM analyst also believes that the positive long-term view of AAXN remains intact.
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The company has recently raised its full-year revenue guidance by 20% compared to previous estimates, thanks to its VIEVU acquisition that added five new major city customers to the Software & Sensors segment.
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