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Wednesday, 01/01/2025 12:37:00 PM

Wednesday, January 01, 2025 12:37:00 PM

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Cybersecurity Stock #5: CyberArk

CyberArk (CYBR) is the global leader in identity security. Centered on Intelligent Privilege Controls, the company offers the most comprehensive security solutions for any identity - human or machine - spanning business applications, distributed workforces, hybrid cloud environments, and the entire DevOps lifecycle. CYBR’s market cap currently stands at about $14 billion.

In 2024, shares of the cybersecurity firm have performed exceptionally well, delivering outstanding returns of 53.2%.


www.barchart.com
Jefferies named CyberArk as its top pick for 2025. The firm has a price target of $400 on the stock. Jefferies said, “CYBR remains well-positioned to sustain momentum in 2025 given an elevated threat environment.” Growth is anticipated to be fueled by new customer acquisitions, maintenance conversions, and Venafi cross-sells, especially in the second half of 2025. The analysts forecast ARR growth in the low- to mid-20% range for the year.

On Nov. 13, CyberArk posted upbeat Q3 results and raised its full-year guidance. CYBR posted a record total revenue of $240.1 million, up 25.6% year-over-year, driven by a 43% increase in subscription revenue, beating the consensus estimate by $6.01 million. Its total ARR grew 31% year-over-year to $926 million. It’s important to note that subscription ARR is making up an increasingly larger percentage of total ARR each quarter. It rose 46% year-over-year to $735 million in Q3 and now constitutes 79% of total ARR, up from 78% last quarter. This should further bolster its top-line growth.

Meanwhile, CyberArk improved its adjusted gross margin by 210 basis points year-over-year to 80.3%, fueled by profitability in its subscription business. The company is achieving significant operating leverage as it shifts more of its revenue from one-time licensing sales to recurring subscription revenue. As a result, Non-GAAP operating income margin reached 15%, up from 9% in the same period last year. Its adjusted EPS came in at $0.94, beating expectations by $0.48.

On Oct. 1, CYBR closed the acquisition of Venafi, a machine identity security software company with approximately $150 million in recurring revenue, for $1.5 billion. This move broadens the firm’s presence in machine identity management at a time when an increasing number of enterprises are using AI models and agents to optimize operations. Management plans to focus on cross-selling the newly acquired Venafi features to its base of 8,500 existing customers.

Looking ahead, CyberArk raised its full-year guidance, expecting sales to range between $983 million and $989 million, up from the previously forecast range of $932 million to $942 million. Non-GAAP net income per share is also projected to be between $2.85 and $2.96, compared to the earlier range of $2.17 to $2.36.

According to Wall Street estimates, CyberArk’s Non-GAAP EPS is expected to skyrocket 163.31% year-over-year to $2.95 in FY24, while revenue is projected to grow 31.34% year-over-year to $987.52 million.

In terms of valuation, CyberArk’s forward price-sales ratio is 14.16x, above the sector median of 3.25x and its five-year average of 10.54x. However, I don’t believe that the stock is overvalued; instead, this premium likely reflects market confidence and the expected benefits from the Venafi acquisition.

Analysts have a consensus rating of “Strong Buy” on CyberArk stock. Among the 29 analysts covering the stock, the majority rate it as a “Strong Buy,” one as a “Moderate Buy,” and one advises holding. The average price target for CYBR stock is $352.89, indicating an upside potential of 10% from the Dec. 27 closing price.


www.barchart.com

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