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On Friday, Citi maintained its Buy rating on CyberArk Software (NASDAQ:CYBR) and increased the price target to $355 from the previous $310. The adjustment comes amid the company's sustained growth in Annual Recurring Revenue (ARR), which has been growing at a rate of over 30% year-over-year.
A notable achievement for CyberArk was the recording of record Net New ARR (NNARR) outside of the fourth quarter periods, alongside significant upside in operating margin (OPM) and free cash flow margin (FCFM).
The analyst from Citi highlighted a few concerns despite the positive outlook, pointing out the less-than-expected beat magnitude and the absence of an organic annual ARR raise, which was adjusted mainly due to the acquisition of Venafi. The anticipated $164 million increase from Venafi was higher than Citi's expectations.
A forecast of flat year-over-year organic NNARR for the fourth quarter also raised some eyebrows, attributed to challenging comparisons with the fourth quarter of 2023, an expected sequential maintenance ARR decrease of about $8-10 million, and a cautious approach by the new CFO, Smith.
The potential pressure from selling stockholders, particularly Venafi insiders who hold approximately $700 million worth of stock, is expected to influence near-term stock movement. However, the Citi analyst expressed continued optimism in CyberArk's robust demand and execution capabilities, especially in core Privileged Access Management (PAM) and the benefits from the expanding workforce. The belief in at least 20% organic growth and the potential rapid cross-selling opportunities with Venafi supports the analyst's positive stance.
The raised Citi estimate (CitiE) and an increment of approximately one turn in the terminal multiple reflect the conservative guidance provided by CyberArk. This reassessment led to the new price target of $355, as Citi reaffirmed its Buy rating on the company's shares.
In other recent news, CyberArk Software (ETR:SOWGn) displayed robust financial results in the third quarter, with a record total revenue of $240.1 million, marking a 26% increase from the previous year. The company's Annual Recurring Revenue (ARR) climbed to $926 million, indicating a 31.3% year-over-year growth. CyberArk's recent acquisition of Venafi, a machine identity security company, is expected to significantly enhance the firm's product offerings and contribute to its ARR.
KeyBanc Capital Markets, TD Cowen, Truist Securities, and Rosenblatt Securities have all adjusted their price targets for CyberArk, expressing confidence in the company's strong performance and future prospects. The firms' analysts have adjusted their estimates upwards in response to the company's latest financial data and strategic moves.
CyberArk's management has projected fourth-quarter revenue to range between $297 million and $303 million, surpassing the consensus estimate of $259.7 million. Non-GAAP operating income is also anticipated to be in the range of $43.5 million to $48.5 million. Additionally, CyberArk announced a change in its financial leadership, with CFO Josh Siegel stepping down after a 13-year tenure, to be succeeded by Erica Smith.
InvestingPro Insights
CyberArk Software's strong performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's revenue growth of 30.31% over the last twelve months aligns with Citi's observations on sustained ARR growth. This robust growth is complemented by an impressive gross profit margin of 81.07%, underscoring CyberArk's operational efficiency.
InvestingPro Tips reveal that CyberArk holds more cash than debt on its balance sheet, which could provide financial flexibility for future growth initiatives or potential acquisitions. Additionally, 25 analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook that aligns with Citi's optimistic stance.
The stock's strong performance is evident in its 61.95% price return over the past year, trading near its 52-week high at 94.69% of that level. This performance reflects investor confidence in CyberArk's business model and growth prospects.
For readers interested in a deeper analysis, InvestingPro offers 13 additional tips for CyberArk Software, providing a comprehensive view of the company's financial health and market position.
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