On Thursday, KeyBanc Capital Markets adjusted its outlook on shares of CyberArk Software (NASDAQ:CYBR), increasing the price target to $355 from the previous $340. The firm upheld its Overweight rating on the company's stock. The adjustment follows CyberArk's third-quarter Annual Recurring Revenue (ARR) that surpassed expectations and a fourth-quarter organic guide that aligns with consensus views.
The reported third-quarter ARR outperformed estimates by $4 million, although this was less than the $12 million outperformance in the previous quarter. The 2024 ARR forecast includes a contribution of $164 million from the recent acquisition of Venafi, which is above KeyBanc's initial estimate of $155 million to $160 million. This implies an organic growth forecast in line with market expectations.
KeyBanc also revised its projections for CyberArk's EBIT margins for 2024 and 2025, each improving by two percentage points, attributing this to the third-quarter beat and the positive financial impact from the Venafi acquisition.
The firm expressed continued optimism for CyberArk's potential in the Privileged Access Management (PAM) market and the favorable competitive landscape. Moreover, the acquisition of HashiCorp (NASDAQ:HCP)'s secrets management product and the potential to add more security controls atop existing Single Sign-On/Multi-Factor Authentication (SSO/MFA) tools were highlighted as competitive advantages.
While KeyBanc maintains a positive outlook on CyberArk's ability to expedite Venafi's growth with increased go-to-market resources, it also noted some long-term concerns regarding the Total (EPA:TTEF) Addressable Market (TAM) for certificate management and potential synergies with Conjur. The possibility of increased competition from ServiceNow (NYSE:NOW), public cloud vendors, and others was also acknowledged.
Despite these concerns, management's proven track record of execution has instilled confidence in Venafi's ARR growth potentially accelerating in the near term from 10% year-over-year.
InvestingPro Insights
CyberArk Software (ETR:SOWGn)'s strong market position and growth potential, as highlighted by KeyBanc Capital Markets, are further supported by recent InvestingPro data. The company's revenue growth of 30.31% over the last twelve months as of Q3 2024 aligns with the analyst's positive outlook on CyberArk's market opportunities. The impressive gross profit margin of 81.07% underscores the company's efficiency in managing costs, which could contribute to the improved EBIT margins projected by KeyBanc.
InvestingPro Tips reveal that CyberArk "holds more cash than debt on its balance sheet" and has "liquid assets exceed[ing] short term obligations," indicating a strong financial position that could support its growth initiatives and potential acquisitions like Venafi. Moreover, the tip that "14 analysts have revised their earnings upwards for the upcoming period" corroborates KeyBanc's optimistic stance on the company's future performance.
It's worth noting that InvestingPro offers 15 additional tips for CyberArk, providing investors with a comprehensive analysis of the company's financial health and market position. These insights can be particularly valuable given the dynamic nature of the cybersecurity industry and CyberArk's strategic moves in the PAM market.
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