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A Preview Of Barracuda Networks' Q3 Results

Jim Swanson

Barracuda Networks Inc (NYSE: CUDA) is scheduled to report its Q3 2017 earnings results on January 9. The key figure to look out for would be “Sales and Marketing as a percentage of revenue,” DA Davidson’s Mark Kelleher said in a report. He maintains an Underperform rating on the company, with a price target of $22.

Barracuda had reported its EPS ahead of the high-end of its guidance range for Q2, representing the second consecutive quarter of beat by “generating significant operating leverage in the Sales and Marketing expense line,” Kelleher noted.

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Management had indicated an increase in spending for Q3. “Overall the company is seeing success with its email security/monitoring offering, as well as network security products,” Kelleher mentioned.

Barracuda’s organic growth was decelerating mainly due to market share loss to public cloud providers such as Amazon.com, Inc. (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and Microsoft Corporation (NASDAQ: MSFT), the analyst stated, adding, “We see no indication this headwind will abate.”

Q3 Preview

The company was able to control marketing expenses, and S&M as a percent of revenue declined from 42 percent in Q2 F2016 to 34 percent in Q2 F2017. Kelleher expects this to rebound to 35.3 percent with “a return to more normal marketing expense levels.”

Management had projected gross billings, which provides an insight into new sales generated in a quarter, at $97 million–$100 million, “somewhat impacted by discontinued products as well as one less selling day in the quarter,” the analyst noted.

Latest Ratings for CUDA

Date Firm Action From To
Jan 2017 JMP Securities Upgrades Market Underperform Market Perform
Nov 2016 Baird Initiates Coverage On Outperform
Oct 2016 JMP Securities Maintains Market Underperform

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