JPMorgan sees 20% upside for this information security firm with 'best-in-class' revenue growth

Published Tue, Oct 17 20238:27 AM EDTUpdated Tue, Oct 17 202311:59 AM EDT

CyberArk will retain its strong position as an industry leader, and investors should buy its stock, according to JPMorgan. The investment bank upgraded shares of the information security company to overweight from neutral, bumping its price target to $200 from $182. JPMorgan's new forecast implies roughly 21% upside. The stock has rallied more than 27% in 2023. Analyst Brian Essex still sees upside for the name, given increasing demand toward high priority cybersecurity spending. He attributed this growth to economic volatility and threats accelerated by artificial intelligence and geopolitical disruptions. CYBR YTD mountain CYBR YTD chart "CyberArk has underperformed our coverage universe YTD with recent pressure due in part to concerns over the company's operational exposure to Israel," he wrote. "However, we believe concern is overdone and see an attractive setup with reasonable expectations, a favorable competitive environment, share consolidation onto its platform, healthy government traction, and an improving fundamental profile." Besides increased demand, Essex thinks CyberArk's growth outlook is exceedingly strong due to government traction and future deal wins. The company's 40% year-over-year growth in the second quarter of 2023 was "best-in-class," and the analyst forecasts this strong revenue growth will continue going forward. Additionally, CyberArk has established itself as a leader within the privileged access management market, which has "few compelling alternatives and relatively low competition." "Due to the critical nature of PAM solutions and extensive technical capabilities required to be delivered by vendors, we believe barriers to entry in this market are relatively high and products are sticky, resulting in lower churn and better than average renewal rates," Essex said. "Considering the company's competitive moat and ongoing importance of Identity Security, we view CYBR as well positioned for share gains and efficient CAC [customer acquisition cost] ahead." — CNBC's Michael Bloom contributed to this report.