On Thursday, Canaccord Genuity adjusted its outlook on Tenable (NASDAQ:TENB) shares, a cybersecurity firm, by reducing the price target from the previous $57.00 to $53.00. Despite the adjustment, the firm maintains a Buy rating on the stock.
The revision follows Tenable's recent earnings report, which revealed lower-than-expected calculated current billings, leading to a downward revision of the revenue guidance for fiscal year 2024.
The analyst noted that large organizations are applying greater scrutiny to their budgets, particularly in core vulnerability management (VM), which impacted Tenable's performance in the quarter.
However, the company's Tenable One and Exposure Management solutions are reportedly continuing to find success. Tenable One was highlighted for accounting for 30% of new business in the second quarter.
Additionally, Tenable has achieved some significant cloud security wins, including a Cloud Infrastructure Entitlement Management (CIEM) deployment with a Fortune 100 financial services firm.
Despite the current market challenges, the analyst believes that vulnerability management will remain a critical component of security architectures, and spending in this area is expected to recover, providing a potential tailwind for Tenable's revenue.
The company has also improved its profitability outlook, issuing a fiscal year 2025 unlevered free cash flow (uFCF) target of approximately 28%, with a long-term FCF margin target raised to over 35%.
This points to an improving financial position for Tenable, with the firm's expansion and unification of its platform, including Cloud-Native Application Protection Platform (CNAPP), seen as additional growth opportunities.
Canaccord Genuity's analysis suggests that Tenable is undervalued, with the stock trading at 17 times the estimated CY25E unlevered free cash flow, which is considered inexpensive for a business expected to grow its free cash flow at a mid-teens rate or higher.
In other recent news, Tenable, a cybersecurity firm, surpassed revenue and earnings expectations in its second-quarter results for 2024, despite a miss on calculated current billings (CCB).
The company reported strong demand for its exposure management solutions, including Tenable One and cloud security offerings. The firm also revealed a 2025 free cash flow target of $280 million to $290 million, indicating a favorable financial trajectory.
Tenable's Q2 2024 revenue reached $221.2 million, a 13% increase year-over-year, with recurring revenue accounting for 96% of the total. Income from operations was reported at $42.8 million, exceeding the guided range by $7.8 million. The company ended the quarter with $487 million in cash and short-term investments.
Despite lower-than-expected CCB, indicating potential budgetary constraints, Tenable remains optimistic about its growth prospects. The company expects a moderate growth outlook for the second half of the year and is committed to leveraging business through sales and marketing efficiency and scaling cloud security solutions.
Canaccord Genuity recently adjusted its outlook on Tenable, reducing the price target from $57.00 to $53.00 but maintaining a Buy rating. The firm's analysis suggests that Tenable is undervalued, with the stock trading at 17 times the estimated CY25E unlevered free cash flow. These are among the recent developments for Tenable.
InvestingPro Insights
In light of Canaccord Genuity's revised outlook on Tenable (NASDAQ:TENB), current InvestingPro data and tips offer additional insights into the company's financial health and market performance. Tenable's market capitalization stands at $5.46 billion, reflecting its substantial presence in the cybersecurity sector. Despite concerns over recent earnings, the company boasts an impressive gross profit margin of 77.36% for the last twelve months as of Q1 2024, indicating strong operational efficiency in generating revenue from its services.
According to an InvestingPro Tip, analysts are optimistic about Tenable's net income growth this year, which aligns with the company's positive profitability outlook mentioned by Canaccord Genuity. Another InvestingPro Tip highlights that Tenable is trading at a high Price/Book multiple of 15.21, which may suggest the stock is valued richly compared to its book value. However, this could also reflect investors' expectations of future growth, especially considering the company's strategic moves in cloud security and the anticipated recovery in vulnerability management spending.
For readers interested in a deeper dive into Tenable's financials and market performance, InvestingPro offers additional tips, with a total of 16 analysts having revised their earnings downwards for the upcoming period. This could be a point of consideration for investors looking at the company's short-term earnings potential. For more comprehensive analysis and tips, readers are encouraged to explore InvestingPro, which includes further metrics and insights on Tenable.
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