A look at CyberArk’s (CYBR) prospects during COVID-driven tech adoption

Like most technology companies, CyberArk Software (NASDAQ: CYBR) is ideally placed to take advantage of the emerging trend in the sector, thanks to the pandemic-related shutdown and spike in the demand for information technology solutions. Meanwhile, the management of the information security company is very cautious in its near-term outlook and withdrew the full-year guidance recently.

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In the coming months, the business of IT solutions providers will be greatly influenced by the ongoing cloud migration and digital transformation, owing to the remote working culture that is gaining ground. With operations being shifted to homes from the usual workplaces, there is a growing demand for security, especially from companies that suffered less damage due to the disruptions.

Investing in CYBR 

CyberArk’s stock has a rather impressive track record, often emerging stronger after pullbacks and staying on the growth path. A section of market watchers who follow CyberArk is bullish about the near-term prospects, but the high valuation and the cloudy outlook could be a dampener when it comes to buying the stock.

Underlying Risks

However, the company is not fully insulated from the pandemic-related disruptions, which can affect operations until the market returns to normal. It is likely that some customers will defer their investment decisions, including IT spending, due to the volatile market scenario. It will have a bearing on the company’s cash position, which is already under stress due to costs related to the recent acquisition of Idaptive.

“At this point, while there is positive momentum and a real business need for PAM, we have limited visibility into our customers’ decision making processes and lack data on close and conversion rates in this environment. Our solution is very sticky and while we have strong renewal rates, we do anticipate that the current uncertainty may have some moderate impact. All of these factors make it difficult to predict the timing of when deals will close.”

Josh Siegel, the chief financial officer of CyberArk

Earnings Beat

In the March-quarter, adjusted earnings dropped to $0.50 per share from $0.56 per share but exceeded analysts’ forecast. Meanwhile, revenues moved up 11% annually to $106.8 million even as all the geographical regions registered growth. The top-line was in line with the market’s projection.

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CyberArk’s shares fell sharply from the peak in March when the market witnessed one of the worst selloffs. Since then, they reversed the trend and regained momentum. The stock has lost 17% since the beginning of 2020 and 22% since in the past twelve months.