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On Friday, Wolfe Research analyst Alex Zukin upgraded Varonis Systems (NASDAQ:VRNS) stock rating from Peerperform to Outperform, setting a price target of $50.00. The upgrade is based on positive survey data and the company’s recent move to accelerate its transition to a SaaS ( Software (ETR:SOWGn) as a Service) model. Currently trading at $41.69, the stock sits near its 52-week low of $39.10, despite maintaining impressive gross profit margins of 83%. InvestingPro analysis reveals 10+ additional key insights about Varonis’s financial health and market position.
Zukin’s analysis suggests that Varonis Systems is on track to achieve over 20% growth in fiscal year 2025. While the company reported 10.38% revenue growth in the last twelve months, analysts are optimistic about future performance. The reconstructed upside model estimates significant increases in on-premise Annual Recurring Revenue (ARR) and SaaS Net New Annual Recurring Revenue (NNARR) for FY25 and FY26. Specifically, projections for SaaS and total ARR in FY25 are $627M and $723M, respectively, which is 4% ahead of consensus. According to InvestingPro, analysts expect the company to turn profitable this year, with forecasted earnings of $0.20 per share for 2025.
The report also forecasts a 3-year Compound Annual Growth Rate (CAGR) of 46% for SaaS and 20% for total ARR through FY27. These figures outpace the consensus estimates of a 16% CAGR for total ARR. According to Zukin, despite expectations for strong ARR growth this year, Varonis shares are currently trading at 7 times Enterprise Value to CY26 Revenue (6 times ARR), which is a 17% discount compared to its Heavyweight Growth peers. With a market capitalization of $4.69 billion, InvestingPro’s comprehensive analysis indicates the stock may be trading above its Fair Value, suggesting investors should carefully consider their entry points. Get access to the full Pro Research Report for detailed valuation metrics and peer comparisons.
Zukin’s recommendation to upgrade the stock to Outperform reflects a bullish outlook on Varonis Systems’ growth potential and valuation compared to its industry counterparts. The $50 price target suggests a confidence in the company’s ability to capitalize on its strategic initiatives and deliver robust financial performance in the coming years. While the company operates with moderate debt levels and currently shows negative earnings (-$0.86 per share), its strong gross margins and projected profitability paint an encouraging picture for potential investors.
In other recent news, Varonis Systems reported a 3% increase in revenue for the fourth quarter of 2024, reaching $158.5 million. The company’s earnings per share (EPS) surpassed expectations, coming in at $0.18 against a forecast of $0.14. Despite these positive earnings, the revenue fell short of market expectations, contributing to broader investor concerns. Varonis has also expanded its infrastructure by establishing new data centers in Mumbai and Pune, India, to help customers comply with local data sovereignty regulations. This expansion aligns with India’s evolving data protection laws and aims to enhance cybersecurity for financial and insurance institutions. Additionally, Varonis has opted for a "Physical Settlement" method for its 1.250% Convertible Senior Notes, meaning note holders will receive shares directly upon conversion. In terms of product development, Varonis launched a new security tool, Varonis for Agentforce, designed to enhance AI security within Salesforce (NYSE:CRM)’s platform. These developments reflect Varonis’ ongoing strategic initiatives to bolster its market position and address evolving regulatory and technological landscapes.
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