On Wednesday, DA Davidson increased the price target for Varonis Systems (NASDAQ:VRNS) to $50, up from the previous target of $47, while keeping a Neutral rating on the stock. The adjustment follows Varonis Systems' reported earnings, which surpassed consensus estimates.
The company's Net New Annual Recurring Revenue (NNARR) exceeded expectations by approximately $5 million. Despite this, Annual Recurring Revenue (ARR) growth was consistent at 18% year-over-year, or 13% year-over-year excluding Software as a Service (SaaS) conversions, based on the analyst's calculations.
The company's recent success was attributed to several factors, including conversions, new customer acquisitions, and the performance of its Managed Detection and Response (MDDR) offerings. Management highlighted the initial contributions from its GenAI and Copilot technologies.
However, it was also noted that federal sales fell short of expectations. SaaS ARR now represents 43% of Varonis Systems' total ARR, with conversions showing an upward trend each quarter.
Looking ahead, Varonis Systems has improved its Fiscal Year 2025 ARR guidance, projecting growth of 17-18% year-over-year. This forecast is slightly below the buy-side expectations, which are speculated to be around 19-20% year-over-year growth.
Despite the positive developments and raised guidance, DA Davidson maintains a Neutral stance on the stock, reflecting a cautious optimism regarding the company's future performance.
In other recent news, Varonis Systems has seen positive adjustments in its stock price targets by multiple firms, following strong financial performance.
UBS has increased its price target from $63.00 to $70.00, maintaining a Buy rating. Similarly, Baird has raised its price target from $60.00 to $62.00, maintaining an Outperform rating. These adjustments came after Varonis reported a 13% year-over-year revenue growth in its second fiscal quarter, with a significant increase in its Annual Recurring Revenue (ARR) to $584.2 million.
Varonis also announced plans to offer $350 million in Convertible Senior Notes due 2029, with an additional option for initial purchasers to buy up to $52.5 million more. In addition, Varonis introduced new data security features at Dreamforce 2024, aimed at enhancing data security for Salesforce (NYSE:CRM) customers.
These recent developments highlight the ongoing momentum of Varonis Systems in the data security and analytics sector.
InvestingPro Insights
Varonis Systems' recent performance and future outlook are further illuminated by key financial metrics and expert insights from InvestingPro. The company's market capitalization stands at $6.59 billion, reflecting its significant presence in the cybersecurity sector. Varonis has demonstrated impressive gross profit margins, with the latest data showing a robust 84.54% for the last twelve months as of Q2 2024. This aligns with one of the InvestingPro Tips, which highlights the company's "impressive gross profit margins."
Another notable metric is Varonis' revenue growth, which reached 12.93% in Q2 2024, supporting the company's positive earnings report mentioned in the article. This growth trajectory is complemented by a strong stock performance, with a 34.35% price return over the past six months and an 86.6% return over the last year. These figures correspond with the InvestingPro Tip noting a "high return over the last year" and a "large price uptick over the last six months."
While Varonis has shown strong top-line growth and market performance, it's important to note that the company is not currently profitable, with an operating income margin of -21.29% for the last twelve months. However, an InvestingPro Tip suggests that "analysts predict the company will be profitable this year," which could be a positive sign for investors considering the recent guidance update mentioned in the article.
For readers interested in a more comprehensive analysis, InvestingPro offers 12 additional tips for Varonis Systems, providing a deeper understanding of the company's financial health and market position.
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