2024-02-20 13:57:45 ET
Summary
- CyberArk Software Ltd. has experienced significant growth and profitability following its transition to a subscription-based business model, as per my expectations one year ago.
- The company's focus on recurring revenue and upselling to existing customers positions it for continued outperformance in growth and profitability.
- However, its valuation has become expensive after the 102% rally over the last year, even with my consensus-exceeding forecast.
- The chart also sees it reaching the end of this four-year rally in the coming weeks and months; the combination of factors brings CyberArk Software Ltd. to a hold.
A year ago, I analyzed the completion of CyberArk Software Ltd.'s ( CYBR ) subscription transition. This transition was a short-term compromise, as it generated low growth due to the effects of losing upfront revenue, but it gained long-term visibility through subscriptions. In that year-ago article, I contended the company had exited the transition period and was ready to see growth accelerate as it pushed headlong into the subscription upsell business. Today, now a year later, it has met and, in some instances, exceeded my expectations. Therefore, the company is on a path for outsized growth in the coming quarters. However, the picture today presents investors with a problem in terms of stock returns....
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CyberArk Proved Its Subscription Transition Worked, But The Stock Has Kept Up