On Friday, Rosenblatt initiated coverage on OneSpan Inc. (NASDAQ: NASDAQ:OSPN) stock with a Buy rating and a price target of $20.00. The firm highlighted a significant improvement in the investment thesis for the cybersecurity company, which currently holds a market capitalization of approximately $600 million. OneSpan's shift from hardware to a software-centric business model has been noted as a key driver for its enhanced subscription revenue growth and profitability.
The company's transformation strategy has resulted in increased revenue visibility, predictable cash flows, and higher profit margins. Rosenblatt pointed out that OneSpan is well-positioned for future growth due to an expanding product pipeline and a solid base of blue-chip customers.
Despite the company's advancements and progress, its stock is still trading at a discount compared to its peers, which Rosenblatt sees as an enticing opportunity for value-oriented investors.
OneSpan's pivot towards a software-centric approach has been marked by a tangible impact on its financial performance. The company's move has been met with strong subscription revenue growth, which is a positive indicator of the company's ongoing transformation and its potential for sustainable long-term growth.
The analyst at Rosenblatt underscored the under-followed and under-appreciated status of OneSpan in the market, suggesting that the company's current valuation does not fully reflect the progress it has made in its business model transformation. This sentiment presents the stock as a potentially undervalued investment in the eyes of the firm.
In conclusion, Rosenblatt's initiation of coverage on OneSpan with a Buy rating and a $20.00 price target reflects confidence in the company's strategic shift and its future growth prospects. The firm's analysis indicates that OneSpan's transition to a more software-focused business is enhancing its financial metrics and could lead to a re-rating of the stock as the market recognizes its full potential.
In other recent news, OneSpan has reported a strong financial performance in its Q2 2024 earnings call. The company saw a 9% increase in revenue and a 15% rise in Annual Recurring Revenue (ARR), with adjusted EBITDA reaching $16 million. Victor Limongelli, who served as interim CEO since January, has been confirmed as President and CEO.
Software and services now make up 75% of the company's total revenue, and OneSpan expects double-digit subscription revenue growth for the full year.
Despite an anticipated decrease in hardware revenue, the company reaffirms its full-year revenue guidance, projecting revenues between $238 million and $246 million and ARR between $166 million and $170 million.
These are recent developments that reflect the company's strategic shift towards software, and a focus on cost savings and targeted investments. The company closed the quarter with $64.3 million in cash and cash equivalents and no long-term debt, indicating a sound financial position.
InvestingPro Insights
OneSpan Inc. (NASDAQ: OSPN) has exhibited noteworthy financial dynamics that align with Rosenblatt's positive outlook. InvestingPro data reveals a robust market capitalization of $575.26 million and a forward-looking P/E ratio of 21.47, suggesting that the company is trading at a reasonable valuation relative to its earnings projections. The PEG ratio, standing at a compelling 0.24, underscores the potential for growth when juxtaposed with earnings expectations over the next period.
Additionally, the company's strategic business shift is substantiated by a solid revenue growth of nearly 9% over the last twelve months as of Q2 2024, further cementing its transition success. With a substantial gross profit margin of 69.43%, OneSpan's financial health appears to be strong. InvestingPro Tips further enhance this narrative; the management's aggressive share buyback strategy and the fact that the company holds more cash than debt on its balance sheet are indicative of a confident outlook on the company's financial management and future performance. Moreover, analysts predict that OneSpan will be profitable this year, which is a testament to its successful pivot towards a software-centric business model.
For investors seeking a deeper dive into OneSpan's financial and strategic positioning, InvestingPro offers additional insights—there are six more InvestingPro Tips available at https://www.investing.com/pro/OSPN. These tips provide a granular view of the company's market potential and financial health, tailored for those considering an investment in OneSpan's evolving story.
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