On Tuesday, Barclays (LON:BARC) maintained its Equalweight rating and $49.00 price target on Tenable Holdings Inc . (NASDAQ:TENB), a cybersecurity company. The firm's analysis centered on Tenable's third-quarter performance and projections for the coming fiscal year.
The analyst from Barclays highlighted three key observations from Tenable's third-quarter results. They noted that the company's Calculated Current Billings (CCB) are expected to be approximately $246 million, representing a year-over-year growth of 9-10%.
This growth rate is considered sub-seasonal compared to previous third quarters, with an 11% quarter-over-quarter increase. The slower growth was attributed to a reduction in Tenable's CCB guidance in the last quarter, which was influenced by decreased Vulnerability Management (VM) spending in North America.
Although the Exposure Management segment is growing more rapidly, the larger VM business segment has been a drag on overall growth.
Looking ahead to fiscal year 2025, Barclays' estimates are more conservative than the average market expectations. The firm forecasts an 8-9% year-over-year growth in CCB for FY25, which is below the Street's projection of around 11% growth.
This outlook is based on the anticipated fourth-quarter CCB rate for 2024. Despite the slower CCB growth, Barclays believes Tenable will still meet its $280 million unlevered free cash flow (uFCF) target, owing to the company's margin expansion.
Additionally, Barclays reported a 6% year-over-year increase in federal spending compared to the third quarter of 2023. Looking forward to Tenable's earnings call, the firm anticipates that questions will likely arise regarding the competitive landscape, particularly after CrowdStrike's (NASDAQ:CRWD) announcement at their Fal.Con event, which could impact the VM market where Tenable operates.
In other recent news, Tenable Holdings Inc., a cybersecurity company, has been the focus of several analyst adjustments following its recent earnings report.
Jefferies initiated coverage on Tenable with a Hold rating, recognizing the company's leadership in the vulnerability management sector and anticipating a three-year revenue compound annual growth rate of 10.5% from 2023 to 2026. Despite this, the firm noted Tenable's expansion beyond its core offerings is still in its early stages.
Several investment firms, including Needham, Scotiabank, Piper Sandler, and Canaccord Genuity, have adjusted their price targets for Tenable. Needham maintained a Buy rating but reduced its price target to $50, citing growth and net expansion rates.
Scotiabank adjusted its target to $44, noting a slowdown in the company's core business demand. Piper Sandler lowered its price target from $60 to $55, maintaining an Overweight rating, while Canaccord Genuity reduced its price target from $57 to $53, maintaining a Buy rating.
Lastly, Tenable's strategic products, such as Tenable One and its cloud offerings, continue to show positive momentum.
InvestingPro Insights
To complement Barclays' analysis of Tenable Holdings Inc. (NASDAQ:TENB), InvestingPro data provides additional context to the company's financial position and market performance. Despite the conservative growth outlook from Barclays, Tenable's revenue growth remains solid at 14.62% over the last twelve months as of Q2 2024, with quarterly revenue growth at 13.44%. This aligns with the company's ability to maintain growth, albeit at a slower pace than previously anticipated.
An InvestingPro Tip highlights that 12 analysts have revised their earnings upwards for the upcoming period, suggesting some optimism in the financial community despite Barclays' more cautious stance. Additionally, Tenable boasts impressive gross profit margins, reported at 77.43% for the last twelve months, which supports the company's potential to meet its unlevered free cash flow targets through margin expansion, as noted by Barclays.
While Tenable is not currently profitable, with a negative operating income margin of -2.25%, another InvestingPro Tip indicates that analysts predict the company will be profitable this year. This projection aligns with Barclays' expectation that Tenable will meet its cash flow targets despite slower billings growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Tenable Holdings Inc., providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.