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Investing.com - Guggenheim downgraded CyberArk Software (NASDAQ:CYBR) from Buy to Neutral on Thursday, removing its price target for the cybersecurity firm. The downgrade comes despite CyberArk’s impressive performance, with the stock surging nearly 16% in the past week and maintaining strong gross profit margins of 78%.
The downgrade follows Palo Alto Networks’ acquisition offer for CyberArk, which includes $45 in cash plus 2.2005 Palo Alto Networks shares per CyberArk share. This structure makes CyberArk’s share price heavily dependent on Palo Alto Networks’ stock performance, with approximately 90% of the deal value tied to Palo Alto Networks stock. According to InvestingPro data, CyberArk’s current valuation appears stretched, with the stock trading near its 52-week high of $452.
Guggenheim noted that while CyberArk continues to demonstrate strong operational performance that could potentially support a higher valuation, the firm sees significant risk from Palo Alto Networks’ operational underperformance.
The research firm expressed concern that Palo Alto Networks’ performance issues could weigh on its share price, consequently affecting CyberArk’s valuation due to the stock-heavy nature of the acquisition deal.
Guggenheim currently maintains a Sell rating on Palo Alto Networks (NASDAQ:PANW) with a price target of $130, well below its current trading price of $183.03.
In other recent news, CyberArk Software has entered into an agreement to be acquired by Palo Alto Networks in a deal valued at approximately $25 billion. Under the terms of the transaction, CyberArk shareholders will receive $45.00 per share in cash along with 2.2005 shares of Palo Alto Networks common stock for each share they own. Following this announcement, BTIG downgraded CyberArk’s stock rating from Buy to Neutral, and William Blair adjusted its rating from Outperform to Market Perform, viewing the acquisition as a strategic move for Palo Alto Networks. Meanwhile, Cantor Fitzgerald reiterated its Overweight rating on CyberArk, maintaining a 12-month price target of $420.00, underscoring a positive outlook despite the acquisition news. Additionally, CyberArk has appointed Kathy Cullen-Cote as its new Chief People Officer, succeeding Ruth Shaked, who is retiring after 12 years with the company. Cullen-Cote brings experience from her previous roles at Teradata (NYSE:TDC) and PTC (NASDAQ:PTC). These developments reflect significant strategic shifts and leadership changes within CyberArk.
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