Citi reaffirms Buy on Rubrik stock after management discussions boost confidence

On Thursday, Citi reaffirmed its positive stance on Rubrik Inc (NYSE:RBRK), maintaining a Buy rating and a price target of $48.00. The endorsement follows recent discussions with the company's CEO and CFO, which bolstered the analyst's confidence in Rubrik's revenue and annual recurring revenue (ARR) growth prospects.

The company is expected to achieve a compound annual growth rate (CAGR) of over 25%, approximately double the market rate, driven by robust win rates and an expanding total addressable market (TAM) that is poised for significant technological upgrades.

The data management firm's growth is anticipated to be fueled by increased penetration of its existing customer base and the overall growth in data volumes. Despite sales capacity being identified as the primary constraint on growth, Rubrik has emphasized its dedication to improving operational efficiency.

This focus is evident as the company continues to enhance its research and development efforts to strengthen its competitive edge and expand its product offerings, including security features.

Citi's analysis indicates that Rubrik's losses are expected to diminish as the company benefits from a higher mix of renewals and scales its international and federal investments, which should contribute to favorable cash flow dynamics in the second half of fiscal year 2025. The firm's stock performance has been lackluster since its initial public offering, affected by skepticism regarding its addressable market, operational losses, and potential industry consolidation.

However, with clearer upside catalysts, increasing credibility in execution, the expiration of the IPO lock-up period, and a valuation that is not demanding given the below-seasonal outlook for the second half, the analyst anticipates a positive trajectory for Rubrik's shares moving forward.

In other recent news, Rubrik Inc. has made significant strides in the data security field. The company's annual recurring revenue (ARR) surpassed expectations, leading to an upward revision of the fiscal year 2025 ARR and margin guidance.

Despite recent market underperformance linked to troubling news involving a former employee and a Department of Justice subpoena, analyst firms such as Piper Sandler, KeyBanc, BMO Capital, Mizuho Securities, and Goldman Sachs have maintained positive ratings on Rubrik, reflecting confidence in the company's future performance.

Piper Sandler reaffirmed its confidence in Rubrik by maintaining an Overweight rating and a $42.00 price target. The firm's reiterated rating underscores a belief in the company's fundamentals and long-term growth potential, despite the recent challenges and market reaction.

These are just some of the recent developments for Rubrik Inc., a company that continues to demonstrate robust financial performance and strategic initiatives in the data security field.

InvestingPro Insights

Rubrik Inc's recent financial data and market performance align with Citi's optimistic outlook. According to InvestingPro data, the company's revenue growth is robust, with a 24.7% increase over the last twelve months and an impressive 35.25% quarterly growth. This strong growth trajectory supports Citi's projection of a CAGR exceeding 25%.

InvestingPro Tips highlight that analysts anticipate sales growth in the current year, with 10 analysts revising their earnings upwards for the upcoming period. This aligns with Citi's positive stance on Rubrik's revenue and ARR growth prospects. Additionally, the company's significant return over the last week (10.4%) and strong return over the last month (13.96%) suggest growing investor confidence, potentially reflecting the market's recognition of Rubrik's improving operational efficiency and expanding product offerings.

It's worth noting that Rubrik holds more cash than debt on its balance sheet, which could provide financial flexibility as the company invests in research and development and expands its international presence. However, the company is not currently profitable, which is consistent with Citi's expectation of diminishing losses in the future.

For investors seeking more comprehensive insights, InvestingPro offers additional tips and in-depth analysis on Rubrik Inc. There are 5 more InvestingPro Tips available for RBRK, providing a broader perspective on the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.