By: Patrick N. Thiel, AIM Student at Marquette
University
Disclosure: The AIM
Equity Fund currently holds this position. This article was written by myself,
and it expresses my own opinions. I am not receiving compensation for it and I
have no business relationship with any company whose stock is mentioned in this
article.
• CyberArk Software Ltd. (NYSE:CYBR) is the global leader in
privileged access security. The firm provides IT security solutions for
enterprises and middle market firms running legacy in house security systems as
well as cloud based solutions.
• CYBR put to rest the
concern regarding their CRO stepping down earlier this year – Matthew Cohen
became the firm’s CRO effective December 2, 2019.
• Recently achieving
Amazon Web Services Security Competency status will expand the firm’s
relationship with AWS and further differentiate CYBR as an AWS Partner Network
member.
• Management raised
full-year revenue guidance after a solid third quarter with traction gaining
across all business segments.
• Government spending
lifted license revenue to $58 million in 3Q, a 25% increase over the same
quarter last year.
Key
points:
CyberArk Software remains 'in-play' after gaining 20.6%
in the month of November. In the 3Q conference call, CEO Udi Mokaday suggested
the company is capable of maintaining robust growth heading into 2020 –
increasing full year guidance on both top and bottom line figures. Management
expects revenue growth of 26% YoY with an adjusted bottom line earnings of
$2.58 to $2.61 a share. The firm has secured 200 new corporations thus far in
Q4, carrying its customer count north of 5,000.
CyberArk named Mathew
Cohen as Chief Revenue Officer in late November, with an effective start date
of December 2, 2019. Ron Zoran will still stay on as an advisor through the
first quarter of 2020 with great confidence that Mr. Cohen is the right person
for the job. Mokaday and the rest of the executive team are also confident in their
choice given Cohen’s successful work history. Mokaday stated, “We are thrilled
to have Matt join CyberArk, Matt is a strong global leader and a great cultural
fit for CyberArk. He adds a wealth of experience delivering comprehensive
go-to-market strategies across functional teams to drive growth…” Cohen is
expected to focus mainly on building out the firms SaaS solutions, driving
growth through the development of new markets. Since 2013, Cohen has held
several executive rolls with PTC, an application software company, exhibiting
the skills and aptitude required to complement CyberArk’s growth strategy.
The recent designation
achievement in AWS Security Competency sets the firm apart from competitors
through the broad pipeline of companies running systems through AWS. Not only
does this demonstrate CyberArk’s ability to develop advanced products, but also
allows for middle market firms to access this much needed level of security in
today’s day and age. AWS enables a highly scalable and cost effect solution to
companies of all sizes, a key area of development in regards to CYBR building
out their middle market offerings.
Government spending and
American investment combated the uneven spending in the EMEA region. The region
slowed to ~13% growth in the quarter due to seasonality and fluctuating
budgets. Negative sentiment has been silenced given a historically backend
loaded trend and comments from management indicating strong performance in the
EMEA thus far in Q4. An optimistic outlook given regulation adoption in the
coming years should continue to carry shares higher in the coming months
anticipating a strong finish to the year.
What
has the stock done lately?
Shares in November far
outpaced the S&P, gaining just north of 20% in the month versus the S&P’s
~3.5% gain. The stock experienced a dip earlier in the year due to concerns
about the industries demand after a weak competitor earnings report. The stock
was also under pressure due to the CRO announcing his resignation, but both
problems seem to be in the past after the Q3 earnings and hiring of Matthew
Cohen.
Past
Year Performance:
In the past year, CYBR shares have
increased ~59%. In the same period, the SPY index gained only ~17%. That being
said, there are significant potential gains in the short term based off of the
technicals in the current trend. When running a regression test, the stock
appears to be trading near the 1st standard deviation below the
mean, supplemented by a slightly oversold RSI reading.
Source:
Bloomberg
My
Takeaway
With several positive
catalysts in the pipeline and a positive outlook from management, I am placing
an overweight rating on CYBR. Matthew Cohen joining management has been
perceived as an investor friendly action given the streets bullish sentiment
and a climbing share price. The miss from ForeScout (FSCT) amid other concerns
have been silenced in the recent weeks and I believe there is a bright future
ahead for cybersecurity in general with CyberArk leading the way.
Source:
Bloomberg
