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Proofpoint Is a 'Leading' Cloud Security Name, But Valuation Is Premium

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While Proofpoint Inc (NASDAQ: PFPT) is likely in “the early stages of its growth opportunity,” the stock does not fully reflect macro risks, DA Davidson’s Jack Andrews said in a report. He initiated coverage of the company with a Neutral rating and a price target of $80.

Proofpoint already has more than 4,000 customers and is a leader in the security market, providing cloud-based protection focused on messaging and data security for mid to large enterprises, analyst Andrews mentioned.

Growth Opportunity

“We believe PFPT is still in the early stages of its growth opportunity,” Andrews commented. Proofpoint has either met or exceeded expectations in every quarter after becoming a publicly traded company. More than 95 percent of the company’s revenue is recurring in nature, with renewal rates exceeding 90 percent.

“Only 27% of its customer base have adopted two PFPT products, and only 19% have more than three PFPT products, which leaves considerable room for cross-selling,” the analyst wrote. He expects the company to continue generating robust growth, with FY2016 revenue being projected at $363.8 million, up 37 percent y/y, and a non-GAAP EPS of $0.08.

Valuation

Proofpoint’s stock is trading at a premium valuation, with investors likely underappreciating macro risks.

Andrews further wrote, “We believe PFPT’s stock price is highly correlated to the overall macro investor sentiment for high-growth technology stocks. Thus, in our view, shareholders of PFPT are making a bet on the overall macro environment, whether they realize it or not.”

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Latest Ratings for PFPT

DateFirmActionFromTo
Aug 2020Morgan StanleyUpgradesEqual-WeightOverweight
Jul 2020Morgan StanleyMaintainsEqual-Weight
May 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for PFPT
View the Latest Analyst Ratings

 

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Posted-In: DA Davidson Jack AndrewsAnalyst Color Initiation Analyst Ratings

Latest Ratings

StockFirmActionPT
WMTOppenheimerMaintains152.0
FBOppenheimerMaintains300.0
ASHEvercore ISI GroupInitiates Coverage On80.0
RPMEvercore ISI GroupInitiates Coverage On90.0
DOWEvercore ISI GroupInitiates Coverage On58.0
View the Latest Analytics Ratings
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