Goldman Sachs maintained its Buy rating on Cyberark Software Ltd CYBR as it sees a strong runway for the company to expand both within existing customers and at new customers with greenfield privileged access adoption.
"Importantly, we do not believe that the sequential decline in 2Q deferred revenue signals any change in the company's medium-term pipeline," analyst Gabriela Borges wrote in a note.
The analyst pointed to the company's strong book-to-bill with no change in renewals and management comments that deferred revenue mix can fluctuate seasonally over the course of the year.
"We are particularly constructive on the company's diversification across end markets as it ramps its sales force and channel support, and we believe customers will continue to look to privileged access products as a relatively simple way of reducing their risk from stolen credentials attacks," Borges continued.
CyberArk reported second quarter results above Street view and guided third quarter in line with consensus. For full-year 2016, CyberArk raised revenue/EBIT/EPS guidance by 1 percent/16 percent/$0.16 at the midpoint, which includes a $1 milion headwind from GBP FX declines. The analyst raised EPS/revenue estimates for 2016-18.
However, the stock was down 6 percent in pre-market hours on sequential decline in the quarterly deferred revenue. Borges said the concerns are overblown and pointed out to a similar scenario after the company's fourth quarter 2015 results. Following the trade down, both the stock and fundamentals proceeded to outperform meaningfully in the following six months.
Shares of CyberArk closed Tuesday at $55.31. Borges has a price target of $58.
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