Baird Starts Coverage Of CyberArk Software On The Sidelines On Lower Market Spend

Although CyberArk Software Ltd CYBR is a leader in the privileged access management (PAM) space and enjoys a strong market reputation, PAM spend remains low versus other areas of security and the company’s success depends on the market’s overall spend, according to Baird.

The CyberArk Analyst

Jonathan Ruykhaver initiated coverage of CyberArk with a Neutral rating and a price target of $85.

The CyberArk Thesis

While CyberArk has a strong operating model, there are concerns related to the company’s slowing growth, margin contraction and large deal exposure, Ruykhaver said in the note.

CyberArk made significant investments last year to expand its portfolio of SaaS offerings. The analyst added, however, that the financial impact from the expanded portfolio could take time to boost growth, given that the company has historically followed a perpetual license model.

Ruykhaver said further that despite the delay, “we are fundamentally positive on a shift toward more recurring revenue.”

CyberArk's guidance for fiscal 2020 reflects a slowdown in revenue growth with operating margin contraction due to the increased investments, the analyst noted. He added that, while the company has historically had strong operating leverage, investors may need growth to improve to “accept these lower margins.”

CYBR Price Action

Shares of CyberArk Software had risen 6% to $77.36 at time of publication.