Wunderlich Downgrades Imperva: 'Future Of The Business Remains Uncertain'

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Imperva Inc IMPV reported disappointing 2Q results, while lowering its FY16 guidance.

Wunderlich’s Ryan MacDonald downgraded the rating on the company from Buy to Hold, with a price target of $50.

Future Uncertain

“When Elliott Management took a stake in the company, potential for M&A became a distinct possibility given the track record of this particular activist investor. While it is not a foregone conclusion that IMPV is acquired, the cut to FY16 guidance, combined with the review for strategic alternatives is enough to question IMPV's future,” MacDonald mentioned.

This, along with the downside protection offered by the presence of an activist investor leads the analyst to expect Imperva’s stock to remain range bound.

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Related Link: All Of Imperial Capital's Cybersecurity Coverage Ahead Of Earnings

2Q Results

The company reported its 2Q revenue at $57.8 million, in line with its preannouncement, driven by a combination of tough year-on-year database comps, acceleration in the shift to the cloud in the Web Application Firewall business and extended sales cycles across all geographies.

The EPS was, however, below the preannounced range. Despite the underperformance, subscriptions revenue grew 88 percent year-on-year, driven by the Incapsula business.

According to the Wunderlich report, “IMPV commented that the board of directors has hired Qatalyst Partners and is initiating a comprehensive review of strategic alternatives to enhance shareholder value.”

Guidance Cut

Management lowered the 2016 revenue guidance from $304–$307 million to $248.6–$250.6 million, while lowering the EPS guidance to ($0.18)–($0.14), below the consensus forecast.

The 3Q revenue and EPS guidance are also well below the consensus expectations.

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Posted In: Analyst ColorEarningsGuidanceDowngradesAnalyst RatingsTechCybersecurityRyan MacDonaldWunderlich
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