CyberArk Downgraded To Neutral At Goldman Sachs, Sees Better Opportunity Elsewhere

Following the 27 percent rise in the share price of Cyberark Software Ltd CYBR since March 21, Goldman Sachs’ Gabriela Borges believes there are “more opportunities in other Security stocks over the next 12 months.”

Borges downgraded the rating on the company from Buy to Neutral, with a price target of $58.

Positive On Fundamentals

The analyst continues to see “significant runway for the company to expand with privileged access and complementary technologies at new and existing customers, as well as the potential for M&A.”

Borges expects CyberArk to witness sales CAGR of 28 percent during 2015-2017, as compared to the 7 percent CAGR of the overall security industry.

Related Link: Goldman Sees A Strong Expansion Runway For CyberArk Software

The company’s EBIT margins of 24 percent, expected for 2017, are also well ahead of the overall growth software sector.

“We continue to view CyberArk as a high-quality small cap asset with a compelling product cycle in privileged access, and a unique balance of growth and profitability,” Borges mentioned.

However, the analyst prefers to get more constructive on the stock at a better entry point.

Upside Through M&A

Borges believes that compared to its peers, CyberArk offers better profitability, although with less predictability due to its perpetual license model. However, the analyst believes the risk-reward is balanced at the current valuation level.

Expecting upside to the stock through M&A, the analyst noted that the company “would be an attractive asset for IT services or security companies looking to expand in the identity and access management market, given its technology leadership and success with driving share gains in this space.”

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