CyberArk: Jefferies raises PT on ARR growth view, Venafi acquisition benefits

Jefferies has increased its price target for CyberArk Software (NASDAQ:CYBR ), citing a favorable 2025 setup for annual recurring revenue (ARR) growth and optimism around the Venafi acquisition.

The brokerage raised its target to $400 from $340 for the cybersecurity firm.

CyberArk’s 2025 ARR expectations, including Venafi, imply a 20% year-on-year growth, aligning with the company’s conservative projections. Jefferies anticipates CyberArk will guide ARR growth in the low-20% range to start 2025, with a gradual upward trend throughout the year.

Venafi, acquired recently, presents significant cross-selling opportunities for CyberArk, Jefferies analysts said in a note. "We remain bullish on Venafi, but acknowledge that it will take time to ramp the growth profile and advise investors to temper near-term expectations," analysts wrote.

If 10% of CyberArk’s existing customers adopt Venafi solutions, it could add $85 million in ARR, Jefferies analysts said, adding that they see this "as very prudent".

CyberArk expects free cash flow margins of 21%-22% in 2024, a notable improvement from 7% in 2023. Jefferies projects further FCF inflection in 2026 and 2027 as the service as a software (SaaS) transition matures, forecasting a 26% FCF margin in 2027.

The conversion of maintenance customers to SaaS remains a key driver, analysts said. With a two to three folds uplift in ARR through these conversions, CyberArk has a substantial opportunity to boost revenue over the next two years, they added.

Overall, Jefferies remains optimistic about CyberArk’s growth trajectory and its ability to capture emerging market opportunities.

Source: Investing.com