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Why is CyberArk Stock Surging Higher?

With the recent cyber-attack on several U.S. governmental agencies now dominating the news headlines and highlighting the risk posed by an increase in cyber-attacks generally, the demand for CyberArk’s (CYBR) services has increased significantly. Several companies have turned to CYBR to secure digital transformations amid the pandemic. With record increases in its software-as-a-service (SaaS) bookings, the company looks set for big gains in the near term based on a growing market for its services, its strategic partnerships, and its consistent technical innovations.

Headquartered in Petach Tikva, Israel, CyberArk Software Ltd. (CYBR) is the global leader in privileged access management, which is a critical layer in IT security to protect data, infrastructure, and assets across an enterprise, in the cloud, and throughout the DevOps pipeline. DevOps is a development protocol that integrates software development and IT operations to shorten development timelines. CYBR’s products provide protection against external and internal cyber threats and enable detection and neutralization of attacks. The company is trusted by more than 50% of Fortune 500 companies.

CYBR’s last fiscal quarter delivered record software-as-a-service (SaaS) bookings. Demand for the company’s CyberArk Privilege Cloud and Endpoint Privilege manager products saw an increase. In fact, the combination of SaaS and subscription revenue represented approximately 28% of the its total license revenue compared to 7% in the third quarter of 2019. Many more companies turned to CYBR last quarter to implement digital transformation, cloud migration, and identity and risk reduction programs.

The company is set to begin a transition to a recurring-revenue model in 2021. It plans to do so by further accelerating its SaaS business and shifting its sales from perpetual licenses to recurring subscriptions.

The company’s stock has gained 48.5% over the past three months, to close Friday’s trading session at $145.08, after hitting its all-time high of $145.88. This impressive performance, and the potential upside based on a few factors, have helped the stock earn a “Buy” rating in our proprietary rating system.

Here is how our proprietary POWR Ratings system evaluates CYBR:

Trade Grade: A

CYBR is currently trading above its 50-day and 200-day moving averages of $110.59 and $107.69, respectively, indicating an uptrend. Moreover, CYBR has gained 36.3% over the past month, reflecting solid short-term bullishness.

For the nine months ended September 30, 2020, CYBR’s total revenue increased 5.2% year-over-year to $319.9 million. Annual Recurring Revenue (ARR) increased 40% year-over-year to $250 million for the third quarter ended September 2020, primarily driven by a significant increase in new SaaS and subscription bookings. The combination of SaaS and subscription revenue has increased nearly 200% year-over-year.

The company announced on November 23 that it is working with Forescout and Phosphorus, which are both members of the C3 Alliance, to enable organizations to secure an increasing number of Internet of Things (IoT) devices and technologies. By 2030, there are expected to be roughly 25.4 billion active IoT devices. On November 18, CYBR announced that it was named a leader in “The Forrester Wave™: Privileged Identity Management, Q4 2020.”

CYBR launched CyberArk Cloud Entitlements Manager on November 9. I It is the industry’s first privilege-based, artificial intelligence-powered service designed to strengthen the security of cloud environments. The company achieved Amazon Web Services (AWS) digital workplace competency status in October. Moreover, CYBR’s CyberArk Privileged Access Security Solution became available on Microsoft Corporation’s (MSFT) Microsoft Azure Marketplace in September.

Buy & Hold Grade: A

In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade considers, CYBR is well positioned. The stock is currently trading just 0.5% below its 52-week high of $145.88.

Driven by its consistent innovation over the years, CYBR’s net revenue grew at a CAGR of 22.3% over the past three years. For example, in 2017, the company automated the on-boarding of credentials with, Inc.’s (AMZN) AWS.

Peer Grade: D

CYBR is currently ranked #13 of 24 stocks in the Software - Security industry. Other popular stocks in the software-security group are Fortinet, Inc. (FTNT), Palo Alto Networks, Inc. (PANW), and Zscaler, Inc. (ZS).

These competitors have comfortably beaten CYBR’s 17.8% gain over the past year. FTNT, PANW, and ZS have gained 35.1%, 55%, and 314.7%, respectively, over this period.

Industry Rank: A

The Software - Security industry is ranked #13 of the 123 industries. The companies in this industry provide cybersecurity solutions for detecting, preventing, and resolving cyber-attacks.

To adapt to ‘new-normal’ needs, several companies have undergone rapid digitalization. However, this increasingly digitized operational structure has brought with it greater cyber-attack risks. Therefore, the demand for software security services has exploded. Because the work-from-home trend is expected to continue even after the pandemic, the industry is expected to continue thriving.

Overall POWR Rating: B (Buy)

CYBR is rated “Buy” due to its short- and long-term bullishness, solid growth prospects, and underlying industry strength, as determined by the four components of our overall POWR Rating.

Bottom Line

CYBR has the potential to gallop in the coming months despite gaining 24.5% so far this year, based on the growing demand for the company’s services. Moreover, CYBR has a broad client base, with companies doing business in various sectors, including manufacturing, telecom, pharma, insurance, banks, and energy.

The consensus revenue estimate of $484.17 million for the next year indicates 7.9% increase year-over-year. Moreover, CYBR has an impressive earnings surprise history with the company beating consensus EPS estimates in each of the trailing four quarters. This outlook should keep CYBR’s price momentum alive in the near term.

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CYBR shares were trading at $145.85 per share on Monday morning, up $0.77 (+0.53%). Year-to-date, CYBR has gained 25.11%, versus a 14.37% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.


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