On Wednesday, KeyBanc has increased its price target for CommVault Systems (NASDAQ: NASDAQ:CVLT) to $122 from $109, while maintaining an Overweight rating on the stock. The adjustment follows CommVault's announcement of a strong fiscal fourth quarter and first quarter, as well as its fiscal year 2025 performance, in addition to setting fiscal year 2026 milestone targets.
CommVault reported a successful beat and raise for the fourth fiscal quarter of 2024 and provided positive guidance for the first fiscal quarter of 2025 and the entire fiscal year of 2025. The company has also outlined its fiscal year 2026 goals, aiming for $1 billion in total Annual Recurring Revenue (ARR), which is a 2% increase over current estimates.
This growth is expected to be driven by a swift transition to Software-as-a-Service (SaaS) offerings, particularly its Metallic platform, with an anticipated SaaS ARR of $310 million to $330 million for the fiscal year 2026, marking a 10% increase from KeyBanc's current estimates.
The shift towards SaaS and Metallic is being fueled by an expanded product suite that includes cyber resilience features. These offerings are projected to account for one-third of the company's ARR by fiscal year 2026, with an expected growth rate of 30-40% from fiscal year 2022 through fiscal year 2026
CommVault's Term License segment witnessed double-digit growth in the fourth fiscal quarter of 2024, and the company has reported a 13% increase in large deal-related business, along with notable new customer growth in North America.
CommVault's strategic positioning to capitalize on market shifts in cyber resilience is strengthened by its acquisition of Appranix on April 16, 2024. The company's leadership in core backup and recovery is complemented by a unified control plane across on-premises, SaaS, and cloud-native workloads, facilitated by the Appranix integration.
This comprehensive and adaptable strategy is anticipated to continue propelling CommVault's top-line growth and transition toward a more recurring Subscription/SaaS model. The company expects Subscription/SaaS to represent 77% of its revenue by the fiscal year 2026, up from 68% in the fiscal year 2024, with a Compound Annual Growth Rate (CAGR) of 20% from the fiscal year 2022 through the fiscal year 2026, and maintaining gross margins above 80%.
This outlook supports KeyBanc's Overweight rating and the new price target.
InvestingPro Insights
CommVault Systems (NASDAQ: CVLT) has been drawing attention with its strategic moves and financial performance. Notably, the company's market capitalization stands at approximately $4.45 billion, reflecting investor confidence. With a P/E ratio of 26.51 and a forward-looking P/E (LTM as of Q3 2024) of 102.42, the valuation suggests that the market is pricing in growth and potential in the company's future earnings. This is supported by a robust gross profit margin of 82.03%, which indicates efficiency in its operations and the ability to maintain profitability.
InvestingPro Tips highlight that CommVault has been aggressively buying back shares, which can be a sign of management's belief in the company's value. Moreover, the company holds more cash than debt on its balance sheet, providing financial stability and flexibility. These factors, combined with an expected net income growth this year, offer a promising outlook for investors.
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