4 Reasons to Buy CyberArk After Its Q4 Earnings Beat
This article is intended to provide the readers with a comprehensive aspect of purchasing the CyberArk to improve the revenue needs for your business growth. If you are new to understanding how CyberArk can be used, then you can upskill the required knowledge with this available online CyberArk Training course to learn how to create and configure CyberArk privileged security solutions, as well as other CyberArk basic concepts. We are going to discuss the four main reasons why you need to invest in CyberArk that helps in increasing the earnings for your business.
The fourth-quarter earnings of CyberArk (NASDAQ: CYBR) were recently released. Revenue for the cybersecurity firm increased 11 percent YOY to $144.5 million, but the net income that is adjusted dropped 14 percent to $32.6 million, or $0.82 per share.
Although the headline statistics exceeded analyst expectations, the guidance of CyberArk is mixed. In the current quarter, management anticipates flat to lower single-digit growth of revenue. Adjusted earnings must fall between a $0.03 loss and a $0.07 profit per share. Both estimates came up with analysts’ shortage forecasts.
CyberArk forecasts revenue to climb only 4 percent to 7 percent for the whole year, but earnings might drop roughly 80 percent YOY.
Although this tumultuous outlook may deter some investors, CyberArk is a good investment for these four reasons.
1) A guiding niche player
Apart from other cybersecurity firms that concentrate on protecting external threats to networks, CyberArk’s technologies block internal networking threats from disgruntled employees and corporate spies.
According to Gartner, CyberArk is the industry leader in PAM, and it currently serves about 6,600 firms worldwide, including more than 50% of Fortune 500 and a third-place among the Global 2000.
As per Market Research Future, PAM solutions’ global market might still develop at a CAGR of nearly 30% from 2020 until 2026. That’s why it’s no surprise that the CEO of CyberArk Udi Mokady stated that the company will continue to profit from “robust industry tailwinds, such as increased privileged access awareness as the main vector of attack”.
2) The downturn of its revenues must be non-permanent
CyberArk paid $70 million for Idaptive, a startup that uses “zero trusts” tools to safeguard network endpoints. Throughout the year, that purchase, combined with the cloud-based services with lower-margin expansion, dragged down the company’s operating and gross margins.
The gross margin fell from 85.6 percent in 2019 to 82.2 percent in 2020, whereas the operating margin fell from 14.4 percent to just 1.3 percent.
Margin pressure is expected to continue in 2021, with increasing Investments in cloud infrastructure squeezing gross margins and higher research & marketing, sales, and development expenses squeezing operating margins.
CyberArk, on the other hand, believes that these investments would pay off since clients shift away from perpetual licensing and towards services based on cloud, that is easier for scaling and providing more consistent recurring revenue.
This continued change would also assist CyberArk keep up with competitors such as Palo Alto Networks and FireEye, who have both shifted away from appliances which are on-premise and towards services based on cloud in current years, as well as CrowdStrike, which offers Security services that are cloud-native.
3) Annual recurring earning growth
CyberArk’s focus on services based on cloud and the recurring subscriptions increased its ARR by 43 percent to 274 million dollars in 2020, accounting for 59 percent of the company’s total revenue.
In 2021, the business expects recurring bookings based on cloud to account for 55 percent of new license purchases, up from around 50 percent in 2020. This transition will certainly impact the company’s short-term profit, but it may lay the groundwork for much higher earnings and revenue growth in the coming years.
4) Stock value is still reasonable
This year’s earnings are almost 300 times, CyberArk’s stock may appear to be expensive. However, recent earnings losses are bloating that ratio of P/E, and at 13 times sales, it still appears to be fairly valued in its peer comparison.
CrowdStrike and Palo Alto, on the other hand, trade at around 9 and 43 times sales for this year, respectively. Moreover, despite its modest enterprise value of 5.5 billion dollars, CyberArk remains an intriguing target for larger takeover corporations looking to build a presence in the PAM market with a niche quickly.
CyberArk is providing third-quarter and full-year 2021 forecasts based on information available as of August 12, 2021.
Quarter Three of 2021:
- Total revenue is estimated to be between $116.0 and $124.0 million.
- The range for non-GAAP operating income (loss) is estimated to be $(6.0) million to $1.0 million.
- The non-GAAP net loss per basic and diluted share is estimated to be in the range of $(0.19) to $(0.02) per share.
- Weighted average basic and diluted shares are assumed to be 40.2 million.
The Complete Year 2021:
- The total revenue range is estimated to be $484.0 to $496.0 million.
- The company expects non-GAAP operating income to be in the range of $7.0 to $17.0 million.
- Non-GAAP net income per diluted share is estimated to vary between $0.01 and $0.26.
- Weighted average diluted shares of 40.8 million are assumed.
CyberArk is not really a market darling such as CrowdStrike, but it does have a large moat and consistently grows. Although its earnings growth in the short run appears to be slow, it can rise from its transition based on cloud as a significantly stronger firm. Over the following few years, investors who purchase the stock today and are waiting for it to get pay off will be rewarded well.