Tenable, CyberArk top 'tactical ideas' by Wells Fargo heading into Q4 results
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Tenable (NASDAQ:TENB) and CyberArk (NASDAQ:CYBR) are investment firm Wells Fargo's top "tactical ideas" in the cybersecurity space as the sector gets ready to report fourth-quarter results.
Andrew Nowinski, who has an overweight and equal-weight rating on Tenable (TENB) and CyberArk (CYBR), respectively, noted both companies saw "strong demand trends" in Wells Fargo's reseller survey and both have "positive investor sentiment."
"Our reseller checks on Tenable were positive and improved relative to [the third-quarter]," Nowinski wrote in a note to clients, adding that investors may be concerned with tougher comparisons than in the past, but revenue estimates are "appropriately factoring that in."
Concerning CyberArk (CYBR), Nowinski noted that investor sentiment is still "largely positive" on expectations of another strong quarter. Nowinski noted that the stock is still "relatively expensive," trading at 6.6 times enterprise value-to-estimated 2024 sales, given it is not profitable and has minimal free cash flow, but this could be a "tactical trading idea into the print, given the strong checks and positive sentiment."
Nowinksi also highlighted other companies in the cyber security space, noting that investor sentiment has become mixed on companies like Fortinet (FTNT), Cloudflare (NET) and Check Point Software (CHKP).
Fortinet (FTNT) is seen as likely to offer guidance below Wall Street expectations, with investor sentiment having turned negative.
The setup on Cloudflare (NET) going into the print is "tricky," Nowinski conceded, as the company has to provide an initial outlook for fiscal 2023 and the consensus is calling for 35% year-over-year growth, compared to 48% growth in fiscal 2022.
"What makes this tricky is the shift in sentiment toward profitability, though management has focused on running at break-even," the analyst added. "We are curious whether management will remain focused on driving revenue growth or shift toward profitability."
Investor sentiment on Check Point (CHKP) is mixed, with investors expecting weaker results than channel checks would suggest, Nowisnki explained.
Earlier this month, investment firm Wedbush Securities did another round of channel checks for the cybersecurity sector and said feedback for CyberArk (CYBR) was positive.