Imperial Upgrades Proofpoint Following Strong Earnings Call

• Having been on a downturn for the past month, shares of Proofpoint Inc PFPT have lost 23 percent since January 4.
• Imperial Capital’s Michael Kim upgraded that rating for the company from In-Line to Outperform, while raising the price target from $65 to $68.
• Proofpoint’s 4Q15 results reflected strong execution and share gains in the company’s core protection business, Kim stated.

Proofpoint reported its 4Q15 revenue at $74.9mn and adjusted EPS at ($0.11), versus the Imperial Capital and Street estimates of $73.5mn and ($0.11), respectively. Subscription revenue grew 37 percent y/y to $72.5mn and contributed 97 percent of the company’s total revenue.

Protection and Privacy revenue grew 39 percent y/y to about $61.5mn and contributed 82 percent of total revenue. Archiving and Governance revenue grew 11 percent y/y to about $13.5mn and contributed 18 percent of total revenue.

Proofpoint guided to 1Q16 revenue of $75.5-$76.5mn, EBITDA loss of $0.5-$1.0mn, and adjusted EPS of ($0.14)-($0.15). Management projected FY16 revenue of $345-$348mn, EBITDA of $12-$14mn and adjusted EPS of ($0.21)-($0.26). The pro

Analyst Michael Kim wrote, “We believe PFPT is continuing to achieve high competitive win rates and renewals. While the archiving and governance business was than expected in 4Q15, we believe PFPT could capture larger transactions during 2H16 based on the company’s pipeline of customers planning to replace their on-premise archiving infrastructure.”

Kim added that there could be greater leverage through channel partners, with the channel currently constituting about 60 percent of new and add-on business, as compared to about 50 percent historically. Moreover, the analyst expects increasing contribution from the international business.

The EPS estimate for 2016 has been raised from ($0.30) to ($0.21) to reflect the company’s strong execution and billings growth in 4Q15.