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Investing.com - JPMorgan has reiterated its Underweight rating and $115.00 price target on Qualys (NASDAQ:QLYS), citing concerns about the cybersecurity firm’s growth trajectory. The company, currently trading at a P/E ratio of 27.08 with a beta of 0.62, has shown revenue growth of 9.14% over the last twelve months.
The investment bank noted that while it expects improved billings for Q2 as Qualys faces easier year-over-year comparisons, the company’s guidance continues to imply margin contraction and declining free cash flow for fiscal year 2025. According to InvestingPro data, Qualys maintains impressive gross profit margins of 81.79%, though this metric could face pressure.
JPMorgan observed that Qualys maintained a cautious FY25 outlook last quarter due to increased budget scrutiny and longer sales cycles, though the firm acknowledged some stabilization in retention rates during April and May, potentially supported by momentum from the company’s mROC alliance.
The bank believes Qualys’ estimates are "relatively conservative" but maintains that "multiple quarters of execution are required in order for investors to underwrite a sustainable inflection toward better growth," while also highlighting that operating expenses will likely remain elevated throughout 2025.
JPMorgan also pointed to the recent departure of Qualys’ Chief Revenue Officer as adding to "a string of executive turnover" that presents "elevated execution risk," reinforcing its Underweight stance based on expectations of single-digit growth, contracting margins, and declining free cash flow. Despite these concerns, InvestingPro’s analysis indicates the company maintains a strong financial health score of 3.0 (Good), with more cash than debt on its balance sheet.
In other recent news, Qualys has reported a strong start to the year with a 10% growth in revenue and a notable operating margin outperformance, as highlighted by RBC Capital Markets. This performance led RBC to raise its price target for Qualys to $140, maintaining a Sector Perform rating. Similarly, Scotiabank (TSX:BNS) increased its price target to $142, citing satisfactory first-quarter results and the company’s decision to significantly raise its 2025 earnings per share target. Despite these positive developments, JPMorgan has maintained an Underweight rating on Qualys, expressing concerns about the company’s growth trajectory and projecting margin contraction and declining free cash flow for fiscal year 2025.
Canaccord Genuity adjusted its price target for Qualys to $158, retaining a Buy rating, reflecting confidence in the company’s solid cybersecurity platform and potential for mid-teens free cash flow growth. DA Davidson maintained a Neutral rating with a $130 price target after Qualys’ first-quarter results showed revenue and EBITDA surpassing expectations, although it noted a slowdown in the Core Customer Base growth. The firm also adjusted its revenue guidance downward for the rest of the year due to increased deal scrutiny. Despite these challenges, Qualys continues to expand through channel partnerships and new growth drivers like Cloud-Native Application Protection Platform capabilities, TruRisk, and TotalAI products.
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