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On Thursday, Evercore ISI analyst Kirk Materne increased the price target on Cognyte Software (ETR:SOWGn) Ltd. (NASDAQ:CGNT) to $10.00 from the previous $7.50 while maintaining an In Line rating. The stock has shown remarkable momentum, gaining over 22% in the past week and 53% in the last six months, according to InvestingPro data. The adjustment follows Cognyte’s report of stronger-than-anticipated fourth-quarter results and an initial fiscal year 2026 outlook that exceeded expectations, with two analysts recently revising their earnings estimates upward.
Cognyte’s management has expressed optimism about the demand environment, citing improved visibility and predictability in their business model. The company has not seen demand diminish due to the current macroeconomic conditions, noting a growing need for technology to support intelligence and law enforcement agencies. This optimism is supported by the company’s solid gross profit margin of nearly 70% and revenue growth of 12.2% in the last twelve months.
The company’s recent earnings call highlighted a significant increase in net new customer additions for fiscal year 2025, with a doubling year-over-year to 60 additional customers. Cognyte also secured a $10 million deal and multiple seven-figure contracts. However, the total Remaining Performance Obligations (RPO) of $545 million was down approximately 7% year-over-year, mainly due to the timing of renewals. The first quarter RPO will include a recently announced deal worth around $60 million.
For the fiscal year 2026, management’s initial revenue growth guidance at the midpoint was 12%, which is well ahead of the 7% consensus. Growth is expected to be driven primarily by renewals. Evercore ISI forecasts gross margins at 71.5%, operating margins at 7.5% (a 300 basis points increase year-over-year), EBITDA at $43 million (an 11% margin up roughly 250 basis points year-over-year), and operating cash flow of approximately $45 million.
Management’s investment in expanding into the US market is beginning to show promising results, with expectations to further capitalize on this strategy in the next 12 to 24 months. Despite the unique challenges Cognyte faces, such as limited disclosure due to its public sector customer base, the company’s stock appears largely de-risked, trading at approximately 1.5 times enterprise value to CY26 sales. InvestingPro analysis indicates the stock is currently trading near its Fair Value, with a "Fair" overall financial health score. For deeper insights into Cognyte’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 8 additional ProTips and extensive financial metrics.
The upcoming Analyst Day on April 8th is anticipated to be a significant event for Cognyte, where management is expected to reveal a three-year target model for the first time and provide deeper insight into product strategy and demand drivers.
In other recent news, Cognyte Software Ltd. reported its first-quarter 2025 earnings, significantly surpassing Wall Street expectations. The company posted an earnings per share (EPS) of $0.03, exceeding the forecast of $0.01, and reported revenue of $94.5 million, above the anticipated $93.15 million. This performance is part of a broader trend for the company, with full-year revenue growing by 12% year-over-year to $350.6 million, largely driven by software sales. In addition, Cognyte’s non-GAAP gross margin expanded by 180 basis points to 71%, and adjusted EBITDA tripled from the previous year to $29.1 million.
Looking ahead, Cognyte projects a revenue of $392 million for fiscal year 2026, reflecting approximately 12% growth year-over-year. The company also expects adjusted EBITDA to increase by 45% to $43 million and anticipates a non-GAAP EPS of $0.16. The U.S. market has been identified as a key growth opportunity, with the company focusing on expanding its presence there. Despite longer sales cycles in the federal market, Cognyte remains optimistic about its U.S. market strategy, as emphasized by CEO Elad Shirong and CFO David Abadi.
These developments come amid a backdrop of strong investor sentiment and positive market reaction. While competitive pressures and macroeconomic uncertainties present challenges, Cognyte’s management is confident in sustaining growth and addressing market demands. Analyst firms have noted the company’s strong fundamentals and optimistic future guidance, which continue to bolster investor confidence.
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