Proofpoint Inc: Long History of Beating Wall Street Consensus
Proofpoint Inc (NASDAQ:PFPT) is a leading, albeit lesser-known, cybersecurity company that has been rewarding investors since the start of 2013. Since then, the company’s share price has soared 897%. In 2019 alone, PFPT stock has advanced approximately 53%.
The award-winning Sunnyvale, California-based company has been fueled by strong financials that consonantly top Wall Street expectations, an aggressive acquisition strategy, and by being in an industry that’s expected to continue to grow for years to come.
Currently trading around $126.25, Wall Street analysts have a 12-month price forecast for Proofpoint of $160.00 per share, suggesting a 25.6% increase from the current level. But that seems a little conservative; a 12-month price target of $175.00, suggesting additional upside of approximately 40%, seems more appropriate.
PFPT Stock Overview
Proofpoint Inc is a leading cybersecurity company that helps its mid- and large-sized customers protect their data from e-mail, social media, and mobile attacks. In fact, Proofpoint is the only cybersecurity company that covers all three of those areas.
Every day, the company looks at more than 100 billion data points from more than 100 million e-mail accounts and 200 million social media accounts. From those, it blocks threats to more than 600 million e-mails, seven million-plus mobile apps, and hundreds of thousands of social media accounts.
The company’s customers include government, more than 50% of the Fortune 500 companies, all of the top five banks, half of the top 10 global pharmaceutical companies, 70% of the top 10 global retailers, and 14 of the leading 15 research universities. (Source: “About Proofpoint,” Proofpoint Inc, last accessed July 17, 2019.)
|PFPT Stock Information|
|Market Cap||$7.0 Billion|
|Shares Outstanding:||55.7 Million|
|50-Day Moving Average:||$115.30|
|200-Day Moving Average:||$114.12|
(Source: “Proofpoint, Inc. (PFPT),” Yahoo! Finance, last accessed July 16, 2019.)
PFPT stock was bullish at the start of 2019 and soared in late January after reporting strong results for the fourth quarter and fiscal 2018. It hit a new 52-week high of $131.43 in late April after the company reported another strong quarter of Wall-Street-topping results.
Sadly, that momentum could not be sustained. In May, the broader markets swooned on fears of a trade war with Mexico and ongoing tensions with China. The former was averted but the latter is still a concern.
Despite the 13% slide in May, Proofpoint stock has rallied back and is trading above $126.00 per share. Some investors may look at the following chart and see a bullish double top, but the May retraction had more to do with the broader market selloff than a lack of investor optimism.
Chart courtesy of StockCharts.com
Q1 Revenue Up 25%, Adjusted Earnings of $0.40
On April 25, Proofpoint Inc announced that its revenue for the first quarter (ended March 31, 2019) increased 25% year-over-year to $202.9 million, while total billings were up 15%, at $215.0 million. (Source: “Proofpoint Announces First Quarter 2019 Results,” Proofpoint Inc, April 25, 2019.)
Gross profit for the first quarter was $147.7 million, a 28% increase from the $115.4 million recorded in the same period last year. Gross margin for the first quarter was 73%, versus 71% in the first quarter of 2018.
The company reported a net loss in the first quarter of 2019 of $28.3 million, or $0.51 per share, compared to a loss of $12.2 million, or $0.24 per share, in the first quarter of 2018.
Adjusted net income for the first quarter of 2019 was $23.1 million, or $0.40 per share, a 39% increase from the adjusted net income of $16.6 million, or $0.30 per share, in the first quarter of 2018.
At the end of the first quarter, Proofpoint had cash, cash equivalent, and short-term investments of $257.0 million. Free cash flow was $48.6 million, compared to $26.4 million in the first quarter of 2018.
Proofpoint will be announcing its second-quarter results after the markets close on July 25. Analysts are expecting the company’s revenue for the quarter to increase 23% year-over-year to $211.3 million and non-generally accepted accounting principles earnings per share to rise 38.5% to $0.36.
Proofpoint Inc has been one of the most rewarding cyber stocks on Wall Street, consistently topping Wall Street expectations by a large margin.
The company’s business model has a 95%-plus recurring revenue model and strong free cash flow generation. Since 2012, the company has a compound annual growth rate of 35%, helped in large part by its sizeable and growing blue-chip customer base and its over-90% retention rate.
Over the same time frame, Proofpoint’s operating and free cash flow has grown from $7.0 million and $1.0 million in 2012, respectively, to an estimated $240.0 million and $202.0 million in 2019.
Thanks to ongoing cyber threats and the company’s growing customer base, PFPT stock’s long-term outlook remains bright.