On Thursday, Barclays (LON:BARC) has updated its outlook on CyberArk Software (NASDAQ: NASDAQ:CYBR), raising the price target to $315 from the previous $280, while maintaining an Overweight rating on the shares. The adjustment reflects a positive stance on the company's performance as it heads into the second quarter of 2024.
Barclays projects a net new Annual Recurring Revenue (ARR) of approximately $44 million for CyberArk's second quarter, which includes about $2 million of renewals that were delayed from the first quarter. This figure represents a roughly 10% year-over-year decrease, attributed to an expected increase in maintenance churn. Despite this, the firm's checks suggest a strong quarter, with potential for an upside scenario of around $49 million in net new ARR.
The firm anticipates a slight sequential dip in CyberArk's operating margin due to expenses from its user conference and additional hiring. However, an improvement is expected in subsequent quarters, with a forecast of double-digit operating margins for the full fiscal year. Barclays also predicts that the company's Free Cash Flow (FCF) will outperform the guided net income margin for the year.
Addressing concerns about market saturation for CyberArk's core Privileged Access Management (PAM) solutions, Barclays does not see the Venafi acquisition as an indicator of slowing growth in CyberArk's core business. Instead, it suggests that the market may not be as crowded as some have speculated. The raised price target to $315 is based on a 12 times multiple, up from 11 times, on the firm's forecasted FY25E ARR, reflecting confidence in CyberArk's prospects for the quarter.
In other recent news, CyberArk Software has maintained its positive ratings from various financial institutions, including TD Cowen, Canaccord Genuity, Piper Sandler, Cantor Fitzgerald, and JPMorgan (NYSE:JPM), due to its strategic growth initiatives. TD Cowen has reiterated its Buy rating and $300 price target, while Canaccord Genuity, despite reducing its price target to $280, has also reaffirmed its Buy rating. Piper Sandler and Cantor Fitzgerald have maintained an Overweight rating and a $300 price target, and JPMorgan has held an Overweight rating with a $288 target.
The cybersecurity company's acquisition of Venafi, a leader in machine identity management, is expected to boost CyberArk's growth and margins, with a significant increase in non-GAAP EPS and revenue growth projected in the coming years. The company aims to achieve an annual recurring revenue (ARR) of over $1.1 billion by mid-2025, with aspirations to reach a $2 billion ARR in subsequent years.
Recent product introductions such as CORA AI and ITDR, alongside the acquisition of Venafi, position CyberArk favorably within the cybersecurity landscape. These developments are expected to capitalize on digital transformation trends and emerging threats. However, the acquisition of Venafi is subject to regulatory approval, with an expected close in the second half of 2024.
InvestingPro Insights
As Barclays updates its outlook on CyberArk Software, highlighting the company's promising future, real-time data and InvestingPro Tips provide additional context for investors considering this cybersecurity firm. With a robust market capitalization of $11.69 billion, CyberArk showcases significant growth with a 29.7% increase in revenue over the last twelve months as of Q1 2024. The company's impressive gross profit margin stands at 80.23%, underscoring its ability to maintain profitability in its operations.
InvestingPro Tips highlight that CyberArk holds more cash than debt, suggesting a solid financial footing. Analysts are optimistic, with 21 having revised their earnings expectations upwards for the upcoming period. This aligns with Barclays' positive outlook and supports the notion that CyberArk's performance could exceed market expectations. Additionally, the company's stock has been noted for low price volatility, which might appeal to investors seeking stability in their portfolio.
For more in-depth analysis and additional InvestingPro Tips, investors can explore CyberArk's detailed financials and forecasts at https://www.investing.com/pro/CYBR. There are 13 more InvestingPro Tips available for CyberArk, providing a comprehensive outlook on the company's financial health and market position. To access these insights, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enriching your investment strategy with valuable data and expert analysis.
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