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Today’s editorial pick for you
3 High P/E Stocks That Still Offer Massive Upside
Posted On Apr 10, 2026 by Chris Markoch
Conventional investing wisdom tells you to avoid high P/E stocks. The price-to-earnings ratio is one of the most commonly cited valuation measures. When a stock’s P/E ratio far exceeds the S&P 500 average, currently around 26x, many advisors say walk away.
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But P/E ratios tell only part of the story. A high multiple often reflects market confidence in future earnings growth. When analysts still see substantial upside despite lofty valuations, patient investors may have reason to pay attention.
Investors who are willing to look beyond the headline multiple and focus on growth trajectory may find that the premium these stocks command is justified. The key question is whether their earnings growth can eventually catch up to their prices, and analysts believe it can.
Axon Enterprises: The Public Safety AI Platform Built for Explosive Growth
Axon Enterprises is best known for its TASER devices, but the company has quietly transformed itself into a comprehensive public safety technology platform. Its products and services span body cameras, digital evidence management, drone systems, and AI-powered software tools for law enforcement and first responders.
That evolution is showing up in the financials. Axon’s total revenue increased 33.47% year over year, and the company is aggressively embedding AI into its product suite. Its software and services revenue is growing even faster, reinforcing the platform’s stickiness with government clients.
Axon’s current P/E ratio stands at approximately 258x. That’s well above the Industrials sector average and most of its peers. That is a steep multiple by any measure. However, based on 13 Wall Street analysts, the average 12-month price target for Axon is $700.18, representing roughly 88% upside from current levels. Some forecasts are even more aggressive, with the highest target reaching $825.
The bull case rests on Axon’s expanding total addressable market. As AI tools become standard in law enforcement and public safety operations, Axon’s platform is positioned as the infrastructure layer. That gives it durable pricing power and high switching costs. That combination tends to support premium valuations over time.
Palantir Technologies: Ignore the Noise, Focus on the Fundamentals
Palantir has been in the headlines recently for the wrong reasons. Famed investor Michael Burry posted on social media, suggesting that Anthropic is “eating Palantir’s lunch” in the enterprise AI market. Palantir shares fell roughly 6% following Burry’s warning, with trading volume well above average.
But analysts say the sell-off reflects a misunderstanding of what Palantir actually does. Palantir’s platforms — Gotham, Foundry, and its Artificial Intelligence Platform (AIP) — are purpose-built for mission-critical, often classified environments. Anthropic builds large language models. These are different products serving different needs.
BofA analyst Mariana Perez maintains a Buy rating and calls the sell-off a short-term reaction to headlines, citing Palantir’s position in mission-critical government data as a durable advantage.
At a forward P/E of around 115x, Palantir trades well above its sector median of 21x. That premium is not lost on skeptics. But Palantir delivered 70% revenue growth in its most recent quarter, and the fundamentals remain robust. The average analyst price target holds at approximately $194.61, implying around 38% upside from recent levels. For growth investors with a longer time horizon, the dip created by Burry’s comments may represent a buying opportunity in disguise.
Kratos Defense: A Drone and Hypersonics Pure-Play in an Era of Rising Threats
Kratos Defense & Security Solutions is a defense technology company focused on some of the most strategically important areas in modern warfare: unmanned aerial systems, hypersonic vehicles, rocket propulsion, and electronic warfare. Its customers include the U.S. Department of Defense, intelligence agencies, and international military partners.
The business fundamentals are strong. Kratos has grown from $150 million to $1.5 billion in annualized revenue under its current leadership, and it carries a backlog exceeding $4 billion. Organic growth rates are expected to accelerate from roughly 14–15% in 2025 to 18–23% by 2027 as hypersonics and AI-driven defense systems ramp up.
Jefferies recently upgraded Kratos from Hold to Buy, citing stronger growth prospects in tactical systems and unmanned platforms, with hypersonics and sustained drone demand as key earnings drivers.
Canaccord Genuity set a price target of $125 for KTOS, representing approximately 43.78% upside from recent prices. The consensus across analysts is firmly bullish. The 17 analysts covering KTOS have a consensus rating of Strong Buy, with an average price target of $96.71. In an era of rising global threats and expanding defense budgets, Kratos is well-positioned to benefit from sustained government investment in next-generation military technology.
What Black Swans Could Emerge and How Should Investors Prepare?
Even with strong analyst backing, high P/E stocks carry elevated risk. A few black swans deserve serious consideration.
First, an unexpected slowdown in government spending, whether from budget reconciliation battles in Congress or shifts in defense priorities, could undercut revenue for all three companies. Axon and Kratos both rely heavily on government contracts, and Palantir generates a significant share of its revenue from federal agencies.
Second, a broad market re-rating of growth and technology stocks could compress multiples sharply and quickly. Stocks trading at 100x to 250x earnings have very little margin for error. Any earnings miss or a reduction in guidance could trigger an outsized decline.
Third, genuine AI competition could disrupt Palantir’s commercial business more than bulls currently expect, even if the government-side moat remains intact.
To prepare, investors should consider sizing positions conservatively, diversifying across all three names rather than concentrating in one, and thinking in terms of multi-year holding periods. Dollar-cost averaging into these positions can help smooth out the volatility that comes with high-multiple stocks.
Patience Is the Price of Entry
High P/E stocks are not for everyone. They demand tolerance for volatility, conviction in the growth thesis, and the patience to let that thesis play out over years — not months. Axon, Palantir, and Kratos all trade at valuations that price in substantial future success. If that success materializes, the rewards for risk-tolerant investors could be significant.
Analysts see meaningful upside in each name despite today’s elevated multiples. For investors who do their homework and manage risk carefully, these high P/E stocks may still have a great deal to offer.
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