Why Axon Enterprise Stock Is Sinking Today

Axon Enterprise (NASDAQ: AXON) stock is losing ground in Wednesday's trading. The policing technologies company's share price was down 8.2% as of 1:15 p.m. ET.

Axon's valuation is slipping today following a downgrade on the stock from an analyst. In a note published before the market opened this morning, Northcoast Research lowered its rating on the stock from buy to neutral.

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Axon stock slips as analyst highlights Flock fallout headwinds

Northcoast analyst Keith Housum lowered the firm's rating on Axon stock today, citing competitive pressures that are creating uncertainty for the company's outlook. In particular, Housum said that the fallout of Axon ending its partnership with Flock Safety was creating issues.

With the dissolution of the partnership, Axon now has to deal with Flock as a competitor -- and Northcoast's analyst believes this means that the stock has limited upside potential in the near term. The two companies forged a partnership in 2020, but Axon recently withdrew from the collaboration -- and leaders from the two companies have been exchanging critical remarks.

What's next for Axon?

Axon is scheduled to publish its fourth-quarter results and host an investor conference call after the market closes on Feb. 25. With its last quarterly report, the company issued guidance for sales between $560 million and $570 million -- good for growth of more than 30% year over year at the midpoint of the target range.

Axon continues to have a strong long-term outlook, but the near-term picture could be a bit bumpy as the company navigates changes stemming from the dissolution of its relationship with Flock. The sales outlook for this year could wind up being weaker than previously expected, which could create pricing pressures for the company's stock.

On the other hand, additional valuation pullbacks could actually create worthwhile buying opportunities. The company has built a leading position in its industry, and strong foundations should help it capitalize on strong growth for the policing technologies space.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axon Enterprise. The Motley Fool has a disclosure policy.