On Tuesday, CommVault Systems (NASDAQ: NASDAQ:CVLT) experienced a change in stock rating as Guggenheim downgraded the data management software company from Buy to Neutral. The firm highlighted that CommVault's shares have seen a significant increase, rising 113% year-to-date, outperforming the iShares Expanded Tech-Software Sector ETF (IGV), which has gained 18% in the same period.
Since Guggenheim initiated coverage on January 26, 2022, CommVault's shares have surged 139%, compared to a 36% rise in IGV.
The downgrade comes after Guggenheim's discussions with resellers revealed that four out of five missed their third-quarter business targets for CommVault. These resellers, including a consultant with insights into multiple businesses, cited a weaker-than-expected finish to the quarter. The slowdown was attributed to increased deal scrutiny and spending hesitation among clients.
Despite the challenges in the third quarter, resellers remain optimistic about meeting their full-year targets due to robust pipelines. Guggenheim's assessment suggests that CommVault is on track to surpass its annual guidance for Total Annual Recurring Revenue (ARR), which is expected to grow by at least 15%, and total revenue, is projected to increase by 10% at the midpoint.
However, Guggenheim sees potential risks to CommVault's revenue and possibly profit in the second fiscal quarter, traditionally the company's weakest. This cautious outlook reflects concerns that the observed market hesitations could impact the company's short-term financial performance.
In other recent news, CommVault Systems reported a 13% increase in total revenue to $225 million and a 17% rise in annual recurring revenue (ARR) to $803 million in the first quarter of fiscal year 2025. The company recently sold its corporate headquarters for $36 million.
In terms of acquisitions, CommVault has expanded its offerings by acquiring Clumio, a cloud data protection vendor, and Appranix, both of which are expected to enhance its cyber resilience offerings and recovery for AWS-based applications.
CommVault also launched Cloud Rewind, a feature developed from the recent acquisition of Appranix, aimed at speeding up the recovery process for cloud-first organizations after cyberattacks. Analyst firms, Piper Sandler and Guggenheim, have maintained their neutral and buy ratings respectively on CommVault.
DA Davidson also expressed confidence in the company by raising the price target for Commvault Systems to $175 from $170, while maintaining a Buy rating.
These developments reflect the company's continuous efforts to enhance its market position and its commitment to providing efficient and robust data recovery solutions. Lastly, CommVault confirmed the election of nine director nominees and the ratification of Ernst & Young LLP as the company’s independent public accountants for the fiscal year ending March 31, 2025.
InvestingPro Insights
While Guggenheim has downgraded CommVault Systems (NASDAQ: CVLT) from Buy to Neutral, recent InvestingPro data paints a picture of a company with strong financial performance. The company's revenue growth of 10.32% over the last twelve months aligns with Guggenheim's projection of a 10% increase in total revenue. Additionally, CommVault's impressive gross profit margin of 82% underscores its operational efficiency.
InvestingPro Tips highlight that CommVault has seen a high return over the last year, with a remarkable 144.93% price total return. This exceptional performance supports Guggenheim's observation of the stock's significant 113% year-to-date increase. However, the tip indicating that CommVault is trading at high earnings and valuation multiples suggests that much of this positive outlook may already be priced into the stock, potentially justifying Guggenheim's more cautious stance.
For investors seeking a deeper understanding of CommVault's financial health and market position, InvestingPro offers 13 additional tips, providing a comprehensive analysis to inform investment decisions.
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