Market Overview

Goldman Sachs, KeyBanc Turn Bullish On Proofpoint

Goldman Sachs, KeyBanc Turn Bullish On Proofpoint

Enterprise security company Proofpoint Inc (NASDAQ: PFPT) reported last week its third-quarter earnings, which resulted in a sell-off. At least two Street analysts are recommending investors to buy the dip.

The Analysts

KeyBanc Capital Markets' Rob Owens upgraded Proofpoint from Sector Weight to Overweight with a new $120 price target.

Goldman Sachs' Gabriela Borges upgraded Proofpoint from Neutral to Buy with an unchanged 12-month $114 price target.

KeyBanc: Issues Now 'In The Open'

Proofpoint reported a beat-and-raise third quarter, although the company historically guides it outlook conservatively, Owens said in a note. The earnings highlighted several other concerning headlines, including the 2020 headquarters expenditure and salesforce productivity. However, these items are now "in the open" instead of management "dragging out various announcements" over time.

Proofpoint's status as a top-tier asset remains unchanged and shares are trading at an attractive valuation. Specifically, the stock is trading at 5.2 times estimated EV/2019 revenue which is a discount to the group average of 6.0 times. The firm's $120 price target is based on a 7.6 times multiple on estimated EV/2019 revenue and justified given expectations for a revenue growth rate in the 20 percent range or higher.

Goldman Sachs: Widest Discount In Years

Proofpoint's stock is now trading at an approximate 30 percent discount to its peers on an EV/sales/NTM growth even though it boasts superior unit economics, Borges said. In fact, this valuation spread happens to be the widest seen in four years, which coupled with three catalysts presents a path for outperformance moving forward.

  • Proofpoint remains a leader in e-mail security and unlike some of its competition the company has the ability to cross-sell additional products to its user base with emerging product bundles.
  • Under a conservative assumption Proofpoint should be able to grow its revenue at a 20 percent compounded annual growth rate through 2021.
  • Based on a historical average of 0.25 times Ev/sales/growth the stock is trading at a valuation which implies a 21 percent growth over the next year but Borges' estimates forecast a 24 percent growth rate.

Price Action

Shares of Proofpoint were trading higher by 7 percent Monday to $89.27.

Related Links:

Attention Cybersecurity Investors: Proofpoint Is No Longer A One-Trick Pony

Goldman Sachs Explains Why Its Proofpoint Call Was 'Wrong'

Latest Ratings for PFPT

Oct 2019Initiates Coverage OnHold
Sep 2019UpgradesHoldBuy
Jul 2019MaintainsBuy

View More Analyst Ratings for PFPT
View the Latest Analyst Ratings

Posted-In: cyber security Goldman SachsAnalyst Color Earnings News Upgrades Analyst Ratings Trading Ideas Best of Benzinga


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