Stock market today: S&P 500 drops for fifth day as focus shifts to Powell’s speech
On Friday, Canaccord Genuity maintained a Buy rating on Qualys (NASDAQ:QLYS) but reduced the stock’s price target to $163 from $170. The adjustment reflects the firm’s view of the cybersecurity company’s financial forecast and investment strategies aimed at driving growth. Currently trading at $140.71, InvestingPro analysis suggests the stock is currently undervalued, with strong financial metrics supporting potential upside.
Qualys is currently navigating what Canaccord Genuity sees as a growth trough in the second quarter of 2024. With impressive gross profit margins of 81.5% and revenue growth of 9.7% over the last twelve months, the company maintains strong operational efficiency. The firm anticipates that Qualys’ Last Twelve Months (LTM) current calculated billings will improve in the fiscal year 2025. Canaccord Genuity believes that to achieve a substantial rise in growth into double digits, Qualys may need to make more significant progress with its products, including CNAPPP, TruRisk, and TotalAI. Additionally, gains could come from better performance in underrepresented market segments such as the Federal sector, or through effective packaging and bundling initiatives.
The guidance for lower earnings per share (EPS) on an annual basis has been noted as a disappointment for the stock, yet the investments that led to this guidance are seen as potentially beneficial in the long term. The firm’s reiteration of the Buy rating and price target adjustment are based on a 27 times multiple of the projected calendar year 2025 Free Cash Flow (FCF), which Canaccord Genuity considers fair for a company with a solid cybersecurity platform and the potential for mid-teen FCF growth in the coming years.
The analyst from Canaccord Genuity expressed confidence that despite the lowered EPS guidance, the planned investments should be effectively utilized. The firm’s stance remains positive on Qualys’ prospects, underlining the importance of strategic initiatives and potential market opportunities as key drivers for future performance.
In other recent news, Baird, a financial services firm, has raised its price target for cybersecurity company Qualys from $145 to $150 while maintaining a neutral rating on the stock. This adjustment comes in light of challenges faced by Qualys, such as pressure on its core vulnerability management business and an increasingly competitive market. Despite these hurdles, Baird’s analysis expects Qualys’ revenue growth to reach the mid-to-high teens percentage range by 2025.
Qualys’ financial health is underscored by its robust operating margins of over 40% and free cash flow margins in the mid-thirties percent range, indicating adherence to the Rule-of-40 for sustainable growth. However, Baird’s analyst suggests that Qualys will continue to face pressure as core vulnerability management becomes increasingly standardized in the cybersecurity industry. These are some of the recent developments surrounding Qualys.
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