Lake Street Initiates Varonis Systems With Buy Rating, $25 Target

• In a report issued Wednesday, Lake Street analyst Yun Kim initiated coverage of Varonis Systems Inc VRNS with a Buy rating and $25 price target.
• The expert noted that the company seems “On the Cusp of [the] Next Big Opportunity in [the] Security Software Market.”

Lake Street initiated coverage of Varonis Systems with a Buy rating and $25 price target on Wednesday. According to analyst Yun Kim, the small cap software provider offers highly differentiated technology, which is well positioned for what the firm believes will be “the next big market opportunity in the security software market –insider threat prevention.” This market is expected to reach about $1 billion this year, with 20+ percent CAGR over the next several years.

The analysts anticipate this market demand will materialize in 2016, and believe “its technology is highly valuable and strategic for many high-profile security software vendors.”

Moreover, the experts think Varonis’ unique technology is likely to emerge as an ideal solution to the top security concern nowadays: preventing data threats from the inside.

Even further, Kim assured, even though the company has been executing well in its growth strategy, delivering a 32 percent top-line CAGR over the last three years, the firm still believes there is room for the company to benefit from application of its technology.

Valuation Also Looks Attractive

Shares are currently trading around 2.1x Lake Street’s CY16 sales estimate. This represents a substantial discount to its peer group average of 5.6x “and reflects investors’ concern regarding past sales execution issues.” However, the experts believe the current valuation “does not reflect potential incremental growth emerging from insider threat prevention market and undervalues the strategic value of its technology and its market opportunity.”

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.