Buckingham Thinks The Probability Of A Deal For Imperva Has Clearly Decreased

Buckingham has cut its target price on Imperva Inc IMPV shares by $10 to $45 on decreasing prospects of a deal in the near term. However, the brokerage reiterated its Neutral rating and the $45 target assumes a 50 percent likelihood of a sale.

Media reports say a sale process has been put on hold, and some potential buyers have withdrawn interest. As such, the brokerage thinks the “timeline for a deal announcement has likely been elongated.”

“We think there is clearly an impediment to a deal and that the probability of a transaction near term has decreased,” analyst Rohit Chopra wrote in a note.

But, he isn't entirely ruling out a takeover and expects the price in the range of 4x-6x EV/S ($43/share-$61/share) on his 2017 sales estimate of $297 million.

Further, despite positive on Imperva’s products, Chopra noted that the company needs better execution to handle the market’s rapid market shift to subscription. In fact, the company also noted extending sales cycles and deals being broken up into phases.

In addition, the analyst’s checks still showing heightened competition.

“We believe risk reward is balanced (upside to $55/downside to $25) at current levels, and would revisit the stock on improving execution, increased visibility and improving growth prospects,” Chopra added.

At time of writing, shares of Imperva were up 0.51 percent to $39.40. The $45 target implies about 15 percent potential upside from current levels.