UPDATE: Bank of America Initiates Coverage on Barracuda Networks on Unique Business Model
In a report published Monday, Bank of America analyst Tal Liani initiated coverage on Barracuda Networks (NYSE: CUDA) with a Buy rating and $26.00 price target.
In the report, Bank of America noted, “Barracuda sells security and storage solutions in a unique business model that generates 70% recurring revenues and high gross margin at about 80%. Its consumer-like marketing strategy has created strong brand equity within its target SMB market, where it offers three layers of disruption: lower price, simplicity and ease-of-use, and a unique go-to-market strategy. We forecast revenue growth of 15-17% in the next two years, with operating margins slowly increasing from 1% to 3%, respectively. However, low margins are mainly related to revenue recognition timing, where FCF margin for the next two years is modeled at 19% and 22%. Also, we believe management's margin targets could prove conservative. Our PO of $26 is based on 4.5x EV/2015 sales, versus 5.4x for the peer group.”
Barracuda Networks closed on Friday at $20.70.
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