RBC Capital Markets Highlights CyberArk as Top Cybersecurity Pick

Author: Lucas Young Updated: 09-20-2024 10:06 AM

RBC Capital Markets Highlights CyberArk as a Top Cybersecurity Pick

RBC Capital Markets has recently recognized CyberArk Software Ltd (NASDAQ: CYBR) as a leading mid-cap cybersecurity stock. Their analysis is compelling, as the firm has assigned a Buy rating along with an ambitious price target of $328. This endorsement by RBC signals strong confidence in CyberArk’s potential for growth and success in the cybersecurity sector.

Continued Growth Potential in Cybersecurity

The analysts at RBC point out that CyberArk stands out due to several robust factors that can drive sustained growth for the company. The focus on identity spending has never been more critical in the cybersecurity landscape, and CyberArk is ideally positioned to capitalize on this trend. Their emphasis on Privileged Access Management (PAM) reflects an understanding of the market's dynamics, opening opportunities for significant expansion.

Innovation and Product Cross-Selling

CyberArk is not just resting on its laurels; the company is innovating and expanding its offerings. With new product cross-sell opportunities in areas like Endpoint Privilege Manager (EPM), Access, and Secrets Management, RBC believes that CyberArk can tap into its existing customer base, enhancing both customer loyalty and revenue streams.

Robust Organic Growth Forecasts

RBC's detailed analysis indicates that CyberArk could maintain an impressive organic growth rate exceeding 20% for the foreseeable future. This growth potential is bolstered by a considerable total addressable market (TAM) estimated at $60 billion, providing a substantial foundation for CyberArk's ongoing expansion.

Strategic Acquisitions Driving Success

One of the more strategic moves made by CyberArk was the acquisition of Venafi, which RBC highlights as a potential catalyst for enhanced growth and profitability. Venafi had an impressive annual recurring revenue (ARR) of approximately $150 million, growing at a rapid pace of over 20%. This acquisition positions CyberArk to leverage Venafi's strengths and expand its market reach even further.

Anticipated Growth After Market Adjustments

While 2023 has posed challenges for many companies, including CyberArk, due to macroeconomic shifts and transitions to software as a service (SaaS), RBC forecasts a positive turnaround. Analysts expect Venafi’s integration will help CyberArk bounce back to growth rates above 20%, owing to minimal customer overlap which enhances cross-selling opportunities.

The Value of Cash Flow

Another critical aspect that RBC raises is the underappreciated value of CyberArk's cash flow. Historical data demonstrates that prior to its shift in strategy, CyberArk reported impressive free cash flow (FCF) margins of around 31% in 2019. While analysts believe it may take a couple of years for these margins to recover to such levels, they forecast a significant improvement in 2024 with an expected FCF margin of 16%, a notable increase from just 7% in 2023.

Looking Forward

Investors are encouraged by the growth projections set forth by RBC. The optimism surrounding CyberArk suggests a bright future with substantial returns on investment as they refine their strategies and enhance their product offerings. As the company continues to adapt and innovate within the cybersecurity market, its prospects look increasingly promising.

Frequently Asked Questions

What is the price target set by RBC for CyberArk Software Ltd?

RBC Capital Markets set a price target of $328 for CyberArk Software Ltd.

Why is CyberArk considered a top mid-cap cybersecurity stock?

CyberArk’s strong growth potential, innovative products, and strategic acquisitions contribute to its classification as a top mid-cap cybersecurity stock.

How does the acquisition of Venafi benefit CyberArk?

The acquisition of Venafi is expected to enhance CyberArk's growth and profitability by diversifying its market offerings and leveraging Venafi's substantial recurring revenue.

What is the anticipated organic growth rate for CyberArk?

RBC analysts anticipate that CyberArk will maintain an organic growth rate of over 20% in the coming years.

What was CyberArk's free cash flow margin in 2019?

CyberArk reported a free cash flow margin of 31% in the calendar year 2019.

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