CyberArk Stock May Be Readying Itself for a Breakout

CyberArk stock
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CyberArk Stock Targeting a Breakout

Everyone understands the increasing number of cybersecurity breakdowns in networks and data centers worldwide.

Just the other day, I received an e-mail from Starwood Hotels and Resorts informing me that my data may have been breached. Apparently, up to 500 million accounts in the Marriott International Inc (NASDAQ:MAR) database may be at risk.

And we all know about the Russian and Chinese hacking stories in the news. All of these external and even internal threats make for a potentially massive global cybersecurity market.

In the mid-cap space, an intriguing company worth a look is CyberArk Software Ltd (NASDAQ:CYBR), which is based out of Israel.

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CyberArk has an extensive client base comprising of over 2,000 companies in 65 countries. It deals with some of the biggest companies in the world, including approximately 40% of the Fortune 100.

After plummeting to a 52-week low of $40.63, the path for CYBR stock has been heading higher and higher.

CyberArk stock traded at a record $84.21 on November 8 and has largely withstood the market hemorrhaging that followed. The stock is up 86% year-to-date and easily destroying the Nasdaq and S&P 500.

Chart courtesy of StockCharts.com

The above chart shows CYBR stock near the top of its sideways channel and looking to break upward toward the $85.00 level and higher. The downside risk for for this stock is $66.00.

My Bull Thesis for CYBR Stock

The doubling in CyberArk stock from the range low was supported by an improving fundamental picture along with momentum in the cybersecurity space.

The company delivered higher sequential revenue growth in four consecutive years. The compound annual growth rate (CAGR) was a healthy 41% from 2014 to 2017.

Fiscal Year Revenue (Millions) Growth
2013 $66.2
2014 $103.0 55.7%
2015 $160.8 56.1%
2016 $216.6 34.7%
2017 $261.7 20.8%

(Source: “CyberArk Software Ltd.,” MarketWatch, last accessed December 13, 2018.)

Looking ahead, revenue and earnings estimates have been on the rise.

CyberArk is estimated to grow its revenue by 26.1% to $329.9 million in 2018 and by 19.1% to $393.0 million in 2019. (Source: “CyberArk Software Ltd. (CYBR),” Yahoo! Finance, last accessed December 13, 2018.)

Also impressive is that CyberArk produces positive earnings before interest, taxes, depreciation, and amortization (EBITDA) and is profitable.

Fiscal Year EBITDA (Millions) Growth
2013 $9.6
2014 $21.2 121.9%
2015 $39.5 86.2%
2016 $42.4 7.5%
2017 $28.2 -33.6%

On an adjusted basis, CyberArk earned $1.16 per diluted share in 2017. For 2018, CyberArk is expected to report an adjusted $1.76 per diluted share and another $1.94 per diluted share for 2019. (Source: Yahoo! Finance, op cit.)

Fiscal Year GAAP Diluted EPS Growth
2013 $0.06
2014 $0.34 466.7%
2015 $0.73 114.7%
2016 $0.78 6.6%
2017 $0.44 -43.6%

(Source: MarketWatch, op cit.)

CyberArk is also positive in terms of free cash flow (FCF), with growth in 2014, 2015, and 2017.

Fiscal Year Free Cash Flow (Millions) Growth
2013 $19.4
2014 $22.4 15.6%
2015 $57.1 154.5%
2016 $53.5 -6.3%
2017 $74.0 38.2%

(Source: MarketWatch, op cit.)

Analyst Take

The fact that CyberArk stock has held up during the selling capitulation is positive and bodes well for a potential breakout.

We are also seeing more institutions buy this stock. About 304 institutions hold  it in 2018 versus about 217 institutions in 2017. (Source: Yahoo! Finance, op cit.)

Look for CYBR stock to test resistance. But should the share price decline back toward support at $66.00, this could prove to be a Christmas gift.