With the vast majority of cybersecurity incidents these days involving stolen identities, CyberArk (CYBR), a provider of an identity security platform centered on intelligent privilege controls, looks well-positioned for continued solid growth.
CyberArk has 8,000+ customers, including more than 55% of the Fortune 500. The company’s platform enables secure access for any type of identity (including machines) to any resource or environment from any device. For 2024, analysts on average expect CyberArk’s total revenue to advance 24% to $916.2 million, while the Street-high estimate of $942.8 million represents growth of 27.6%.
CyberArk is a clear leader in privileged access management (PAM), securing privileged credentials and secrets both on-premises and in the cloud. The company primarily serves large enterprises as well as the upper end of the mid-market segment (organizations with annual revenue of at least $500 million). An elevated threat landscape, continued migrations to the cloud and exponential growth in identities are all working to drive demand for the company’s products.
Identity security requires the correct level of privilege controls. Organizations struggle with how to assign privileges and provision access to provide each identity with the right level of security at the right time. CyberArk is the only vendor with an identity security platform that can offer customers the flexibility to provide standing access, just-in-time access or zero standing access privileges depending on the identity type and the specific targets needed to be accessed.
A number of recent high-profile, identity-related breaches (including those at Caesars and MGM Resorts) have put identity security in the spotlight. Operating in a $50-billion total addressable market, CyberArk gives investors exposure to one of the highest-priority spending areas in the cybersecurity sector. Thus, it’s not surprising that CyberArk shares this month hit a new all-time high of $241.36. In 2023, the stock gained 69%. Recently trading around $236, the shares are up 7% YTD.
In Q3, CyberArk reported total revenue of $191.2 million (coming in 3.5% above the consensus estimate), with growth accelerating to 25% from 24% in the June quarter. Recurring revenue of $174.4 million (representing 91% of total revenue) advanced 36%, accelerating from growth of 31% in Q2. Total annual recurring revenue (ARR) of $705 million was up 38%, with the subscription portion of $504 million (72% of total ARR) delivering excellent growth of 68%.
On the Q3 earnings call, CyberArk CEO Matt Cohen said the company “experienced a firming of the macro environment compared to the last few quarters.” Bookings growth was better than expected and deal close rates improved nicely. Cohen said it was another healthy quarter in terms of pipeline build, while conversion rates within the pipeline remained strong. The latest quarter brought in a lot of new business, with CyberArk signing about 230 new logos.
Customers are increasingly landing with two or more CyberArk solutions, which is driving up deal sizes on new logos. In Q3, there was a healthy increase in the number of 7-figure annual contract value (ACV) deals, as organizations allocate more of their budgets to CyberArk solutions. Among the key products, Privileged Access Management and Endpoint Privilege Management remain favorites, while the access and cloud security offerings are gaining ground.
Lately, CyberArk has been gaining more bulls on Wall Street. In December, Wells Fargo upgraded the stock to ‘Overweight’ with a price target of $250, saying the company is smartly capitalizing on recent breach activity, delivering robust SaaS growth and expanding its operating margins. BofA earlier this month raised its CyberArk target to $255 from $230, calling out the company’s favorable competitive positioning and strong execution in the “under-appreciated” PAM market.
In December, Jefferies started CyberArk at ‘Buy’ with a target of $250. The firm believes the company is well-positioned in a sizable market and appears capable of sustaining momentum given that the macro environment looks to be stabilizing. JP Morgan lifted its target to $248 from $207, calling CyberArk one of the best-positioned security software vendors. Given that identity is now a higher priority in security budgets, CyberArk could see accelerating demand.
Oppenheimer recently boosted its CyberArk price target to $260 from $195, calling the company a premier player in identity security that boasts a deep product offering. The firm believes CyberArk can benefit from demand tailwinds driven by an increasing attack surface and prioritization of identity security. The company has the ability to leverage its broad identity platform to capitalize on customers consolidating their security vendors, which can lead to market share gains, according to Oppenheimer.
