Investing.com -- RBC Capital Markets initiated research coverage of Cyberark Software Ltd (NASDAQ:CYBR), assigning an Outperform rating and a price target of $328.
CYBR shares rose more than 1% on Friday.
The firm identified CyberArk as a "top mid-cap cybersecurity idea," citing several factors that could sustain its growth.
Among these are the significance of identity spending in cybersecurity, the potential for expansion within the core Privileged Access Management (PAM) market, and opportunities arising from new product cross-sells in Endpoint Privilege Manager (EPM), Access, and Secrets Management.
The analysis by RBC Capital Markets suggests that CyberArk is well-positioned to maintain an organic growth rate of over 20% for several years, supported by an estimated total addressable market (TAM) of $60 billion.
RBC analysts also believe that CyberArk has the potential to consolidate various aspects of the identity market, particularly in the mid and large enterprise segments, through its persona-based selling model which includes workforce, IT, developers, and machine identities.
Furthermore, the firm highlighted the strategic acquisition of Venafi by CyberArk, which it believes could be “accretive to growth and profitability.”
Venafi had an annual recurring revenue (ARR) of approximately $150 million growing at a rate of over 20% pre-2023.
Despite a slowdown in growth in 2023 due to macroeconomic factors and a shift to SaaS, RBC anticipates that Venafi will return to over 20% growth as part of CyberArk, with significant cross-sell opportunities due to little customer overlap.
Lastly, analysts pointed to CyberArk's cash flow as an underappreciated asset. Before transitioning, CyberArk reported free cash flow (FCF) margins of 31% in the calendar year 2019.
“While it will be a few years before they return to 30% + FCF margins, we note 2024 guidance calls for 16% FCF margin, up from 7% in 2023, as we think this accelerates beyond 2025,” analysts said.