Is CyberArk Software a Mid-Cap Stock to Secure Your Portfolio?

NASDAQ: CYBR | CyberArk Software Ltd. News, Ratings, and Charts

CYBR – CyberArk Software (CYBR) delivered impressive first-quarter results, beating analyst expectations for revenue and earnings. Further, the company raised its full-year 2024 guidance. However, CYBR’s stock is overvalued, trading significantly higher than its peers. So, should you consider adding this mid-cap stock to your portfolio? Read more to find out….

CyberArk Software Ltd. (CYBR), an Israel-based provider of cybersecurity solutions valued at $11.68 billion market cap, delivered solid financial results for the first quarter of 2024. The company reported a double-digit year-over-year growth in total revenue to $221.60 million, beating analysts’ estimate of $213.22 million. Its Subscription ARR growth was 54% from $403 million on March 31, 2023

Furthermore, CyberArk posted a first-quarter non-GAAP net income per share of $0.75, exceeding the analysts’ expectations of $0.27. Moreover, the company has surpassed consensus revenue and EPS estimates in all four trailing quarters, which is impressive.

Matt Cohen, CYBR’s CEO, said, “Every organization has a spectrum of identities across IT, developers, workforce, and machines to secure. Our ability to apply the right level of security controls across all identities – humans and machines – is a unique differentiator that resonates with customers and partners alike. The combination of our unified identity security platform and best-in-class security controls is driving customers to consolidate trust with CyberArk.”

“In cybersecurity all roads lead to identity, keeping identity security at the top of the CISO’s priority list. We are well positioned to further extend our leadership position in identity security in 2024, and beyond,” Cohen added.

For the second quarter of 2024, CyberArk expects total revenue to be between $215 million and $221 million, representing an increase of 22%-26% compared to the second quarter of 2023. Its non-GAAP operating income is anticipated to be $12-$17 million. Also, non-GAAP net income per share is expected to be $0.34-$0.44.

For the full year, CYBR’s total revenue is projected to be $928-$938 million, representing growth of 23%-25% versus fiscal year 2023. The company expects its no-GAAP operating income and non-GAAP net income per share to be $90.50-$99.50 million and $1.88-$2.07, respectively.

Further, as of December 31, 2024, ARR is expected to be $975 million to $990 million, representing a rise of 26%-28% from December 31, 2023. Its non-GAAP free cash flow is anticipated to be $115-$125 million for the full year.

In this modern digitized age, cybersecurity is of utmost importance. Companies like CYBR protect our information from unauthorized access and data breaches. CyberArk recently released CyberArk Secure Browser, which provides secure, consistent access to resources and helps prevent the malicious use of compromised identities, endpoints, and credentials.

Shares of CYBR have gained 17.7% over the past month and 25.2% in the past six months to close the last trading session at $270.65.

Let’s look at factors that could influence CYBR’s performance in the upcoming months.

Positive Recent Developments

On May 21, CYBR announced new enhancements across its Identity Security Platform. The new functionality allows organizations to apply the right level of privilege control to every identity while offering consistent customer experience for CyberArk administrators and end users using AI and Identity Detection and Response (ITDR).

On May 20, CYBR signed an agreement to acquire Venafi, a leader in machine identity management, from Thoma Bravo. This acquisition will combine Venafi’s machine identity management capabilities and CyberArk’s leading identity security capabilities to form a unified platform. This strategic initiative is expected to boost the company’s income stream and extend its market reach.

Solid Financials

For the first quarter that ended March 31, 2024, CYBR reported total revenue of $221.6 million, an increase of 37% over the prior year’s quarter, and Subscription revenue rose 69% year-over-year to $156.20 million. Its total ARR grew 34% year-over-year to $811 million on March 31, 2023.

Additionally, the company’s non-GAAP net income came in at $35.90 million and $0.75 per share, compared to a non-GAAP net loss of $6.90 million, or $0.17 per diluted share, in the same period of 2023. As of March 31, 2024, CYBR’s cash, cash equivalents, short-term deposits, and marketable securities stood at $1.40 billion.

Mixed Analyst Expectations

Analysts expect CYBR’s revenue and EPS for the second quarter (ended June 2024) to grow 24.6% and 1,223% year-over-year to $219.13 million and $0.40, respectively. However, the company’s EPS for the third and fourth quarters of 2024 is expected to decline by 9.9% and 37.6% year-over-year to $0.38 and $0.51, respectively.

For the fiscal year ending December 2024, Street expects CYBR’s revenue and EPS to grow 24.4% and 81.5% from the prior year to $935.63 million and $2.03, respectively. In addition, the company’s revenue and EPS for the fiscal year 2025 are expected to increase 22.1% and 61.6% year-over-year to $1.14 billion and $3.29, respectively.

Mixed Profitability

CYBR’s trailing-12-month gross profit margin of 80.23% is 62.7% higher than the 49.30% industry average. Also, the stock’s levered FCF margin of 16.63% is 68.9% more than the industry average of 9.85%. However, its trailing-12-month EBIT margin and net income margin of negative 9.20% and negative 3.20% compared to the industry averages of 4.94% and 3.01%, respectively.

Further, the stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 3.43%, negative 3.51%, and negative 1.27% are unfavorably compared to the industry averages of 4.26%, 2.75%, and 1.69%, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, CYBR is trading at 133.11x, 449.1% higher than the industry average of 24.24x. The stock’s forward EV/Sales multiple of 11.62 is 297.4% higher than the industry average of 2.92. Likewise, its forward Price/Cash Flow of 84.14x is considerably higher than the industry average of 23.44x.

Moreover, the stock’s forward Price/Sales multiple of 12.48 is 331.9% higher than the industry average of 2.89. Its forward EV/EBITDA of 95.65x is 545.2% higher than the industry average of 14.83x.

POWR Ratings Reflect Uncertainty

CYBR’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. It has a C grade for Stability, which is justified with its 24-month beta of 1.47. CYBR also has a C grade for Sentiment, consistent with its mixed analyst estimates.

Within the Software-Security industry, CYBR is ranked #12 out of 23 stocks.

Beyond what I have stated above, we have also given CYBR grades for Growth, Momentum, Quality, and Value. Get all CYBR ratings here.

Bottom Line

CYBR surpassed analysts’ estimates for revenue and earnings in the first quarter of 2024. Its first-quarter results reflect its focus on boosting growth and profitability at scale, with an impressive 54% Subscription ARR year-over-year growth and 37% revenue growth while expanding its operating margins and cash inflows from operating activities.

Further, CyberArk raised full-year guidance across all metrics. However, despite being in a booming cybersecurity industry, CYBR is yet to make its mark, as it faces stiff competition from well-established firms and needs to innovate continually to gain a competitive edge.

Also, the stock is trading at a premium compared to its peers. Given CYBR’s stretched valuation and enhanced volatility, waiting for a better entry point in this stock seems wise now.

How Does CyberArk Software Ltd. (CYBR) Stack Up Against Its Peers?

Given its near-term uncertain prospects, the odds of CYBR outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three A (Strong Buy) or B (Buy) stocks from the Software-Security industry:

Clear Secure, Inc. (YOU)

Radware Ltd. (RDWR)

Darktrade PLC ADR (DRKTY)

To explore more A- and B-rated cybersecurity stocks, click here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! > 

CYBR shares were trading at $271.20 per share on Wednesday morning, up $0.55 (+0.20%). Year-to-date, CYBR has gained 23.81%, versus a 16.28% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
CYBRGet RatingGet RatingGet Rating
YOUGet RatingGet RatingGet Rating
RDWRGet RatingGet RatingGet Rating
DRKTYGet RatingGet RatingGet Rating

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