Pacific Crest Initiates CyberArk Software At Sector Weight, Looking For Better Entry Point

CyberArk provides "a solution set that enables granular policy control, process automation and threat detection." More importantly, the brokerage noted that a $1.8 billion TAM implies only a modest 30 percent market penetration by current players and offers room for growth.

"With lofty expectations reflected in its valuation, we would look to get more constructive on a valuation reset or further evidence of an inflection in TAM capture," analyst Rob Owens wrote in a note.

Related Link: CyberArk Receives U.S. Technology Patent For Detecting Cyber Security Risks

Owens projects 22 percent revenue growth for the out-year, a drop from the recent trends and reflects difficult comparisons. However, the analyst feels his estimate "could prove conservative to the extent market adoption accelerates on highly publicized hacks that underscore the value of the solution."

Despite CyberArk lacks a pure subscription-based model, the analyst said the company's long sales cycles and consistent win rates provide visibility to deal pipeline.

Owens highlighted that CyberArk's greater than 20 percent operating margin profile is on par with "larger, best-in-class, high-growth security names," with potential to capitalize on top-line growth with meaningful sales and marketing expense leverage.

At the time of writing, shares of CyberArk had fallen 1.45 percent to $50.96.

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