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Why CyberArk Software Is Up More Than 7% Today

By James Brumley – Nov 4, 2021 at 12:08PM

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This surge follows months of investors buying for all the right reasons, but it may have also pushed the share price to a short-term tipping point.

What happened

Shares of cybersecurity company CyberArk Software (CYBR 2.12%) are trading more than 7% above Wednesday's closing price as of early afternoon Thursday in response to a strong third-quarter report and encouraging fourth-quarter guidance.

So what

For the quarter, CyberArk Software turned $121.6 million in revenue into an operating loss of $0.06 per share. The top line was an improvement from its year-ago revenues of $106.6 million, and while CyberArk swung from a non-GAAP profit of $0.31 per share in the prior-year period to a loss this time around, it did beat analysts' consensus estimate, which called for a loss of $0.07 per share. It also handily topped the consensus sales estimate of $119.8 million.

Rising bar chart drawn on a chalkboard.

Image source: Getty Images.

Guidance for the quarter now underway bolstered the buy thesis. Management anticipates Q4 revenue of between $140 million and $148 million, which should translate into operating profits of between $0.06 and $0.21 per share. The analyst community is only collectively looking for a Q4 top line of $141.5 million and earnings of $0.14 per share.

The third-quarter report showed the company extending a well-established growth trend, and based on the fourth-quarter guidance, that pattern should continue.

Now what

By topping its third-quarter estimates, CyberArk soothed the concerns it raised three months ago, when for the first time in more than three years it logged an earnings shortfall. The beat affirms the company's heightened focus on subscription-based services. That shift has adversely impacted its historically firm profitability, but in the pursuit of a bigger-picture, longer-term good. That's what the stock's 69% rally from the 2021 low point it touched in May suggests is the case, anyway.

The share price, however, has gotten a little bit ahead of itself. Though analysts have had plenty of time to make adjustments to their price targets, the consensus of the community is that CyberArk shares are only worth a little over $189 apiece -- about 3% less than their present price.

Given the sheer scope of the stock's run-up since May and the size of Thursday's surge, we could easily see significant profit-taking that would undermine the stock's value. Such a short-term headwind would not change the fact that the analyst community still rates this ticker a "buy," but it does make CyberArk Software a tough name to step into right now.

James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends CyberArk Software. The Motley Fool has a disclosure policy.

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