Varonis: Solid quarter but R&D investments and FX impact EPS; Raising PT to $63 (up from $45)
For the 11th consecutive quarter, Varonis reported results that beat estimates and provided revenue guidance that is ahead of consensus. However, the company guided EPS that fell well below consensus driven by FX (Shekel) impact (300bps) on Opex and increasing investments in R&D that the company believes are needed to drive towards Billion dollars in revenue. While some investors might be disappointed, we believe the larger story is still intact and the company clearly sees a big opportunity, with revenue growth in low-to-mid twenties, likely to continue for several years. We believe revenue growth can accelerate from the current levels as end customers understand the need for securing the data. Varonis’s proprietary platform is one of the most comprehensive suites of software available today to manage unstructured data. Given that Varonis is one of the foundational security vendors in our coverage universe, we believe it is on the shopping list of both infrastructure and security players. With barely any competition, Varonis fills in a VOID (i.e. protecting the data) that is completely overlooked by traditional security and infrastructure vendors. We remain confident in VRNS’s technology and its long-term growth prospects. We reiterate our BUY rating and raise our PT to $63 (up from $45).
Summit Insights Group LLC (SIG), founded by Srini Nandury in 2018, is a fundamentals-driven, technology-focused, equity research boutique. SIG analysts cover Semiconductors, Semicap Equipment, Enterprise & Application Software, and IT Hardware & Storage companies. The firm also provides insight into adjacent areas such as Mobile and Internet Technologies.
SIG provides deep, rigorous technology and financial analysis, unlike Wall Street analysis that is mainly driven by financial models. SIG principal analysts are known for their extensive industry experience, which we believe is essential to evaluate technology industry stocks. Each principal analyst has at least 5 years of hands-on industry experience prior to their tenure in equity analysis. SIG analysts are known for making non-consensus prescient stock calls.
SIG analysts follow more than 100 stocks regularly in the areas of Enterprise and Application Software, Storage, Networking, Security, Flash Memory, Big Data, Storage Networking, SSD and Processors. SIG analysts have access to the managements of both public and private companies to verify factual items from public comments or published statements, buttressing the integrity of our analysis. SIG analysts regularly attend industry conferences and visit startup companies to understand technology trends driving the industry. SIG is not a broker dealer, hence it does not have investment banking or trading conflicts. At SIG, we value integrity, our client interests and confidentiality above all else.
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