CyberArk’s 2Q15 Results and Forecasts Are In
CyberArk (CYBR) and Palo Alto Networks (PANW) are two cybersecurity companies that have seen their stocks rally by over 56% and 92%, respectively, in the last 12 months. By comparison, peer company FireEye (FEYE) has seen its stock price increase by 24% in the same period.
CyberArk locates internal threats that breach a company’s first layer of security, and it mainly focuses on protecting privileged accounts that are accessed by cyber criminals. Palo Alto, on the other hand, has a product that protects businesses from data breaches.
As seen in the first part of this series, CyberArk’s revenue saw a YoY growth of over 70%, whereas revenues of Palo Alto grew by only 55% YoY and 54% QoQ. CyberArk is one of the few companies in the cybersecurity space that has been profitable in the last few quarters, with a net income that increased by 300% YoY in 2Q15, to $4.9 million. In comparison, Palo Alto reported a GAAP net loss of $45.9 million, or $0.56 per share, in its last quarter, compared to a net loss of $147 million, or $1.96 per share, in the same period last year.
The main explanation for CyberArk’s profitability is that expenses constitute 77% of total revenues, whereas Palo Alto’s expenses stand at 115% of total revenues. As Palo Alto is generating lower profits at a higher cost in comparison to CyberArk, the firm does not have much room to increase expenses.
CyberArk and Palo Alto are trading at a PE (price-per-earnings) ratios of 105x and 65x, respectively. By comparison, the S&P 500 is currently trading at a PE ratio of 20x. Investors should take into account that high-multiple stocks are generally impacted the most during market downturns, and so the two companies’ stocks appear to be in the high-risk, high-growth segment.
Analysts expect revenues of CyberArk and Palo Alto to rise by 40% and 50%, respectively, in 2016. The long-term prospects of both firms look positive, as costs of data breaches worldwide are expected to reach $2.1 trillion by 2019, according to Juniper Research.
CyberArk makes up 0.01% of the iShares Russell 1000 Value ETF (IWD) and the iShares Russell Mid-Cap ETF (IWR).
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