BTIG Bullish On Barracuda Networks, Sees Several Near-Term Catalysts

BTIG analysts raised the price target on Barracuda Networks Inc (NYSE: CUDA) shares by $2 to $28 after it reported solid second-quarter results, which sent its shares up over 12 percent in the pre-market hours.

Barracuda Networks' second quarter non-EPS of $0.21 handily beat consensus' $0.13 estimate and revenue grew 12 percent to $87.9 million, also topping Street view of $85.27 million.

"Billings and revenue beat slightly, suggesting improving momentum in the core business, while the EPS beat (partially aided by one-time items) highlights the re-emerging leverage in the subscription model," lead analyst Joel Fishbein wrote in a note.

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Driven by strong traction for Office 365 security product, subscription revenue rose 19 percent to $66.9 million. Gross billings were $100.3 million, compared with $98.4 million in the second quarter of fiscal 2016. The number of active subscribers grew about 14 percent to over 298,000 and the dollar-based renewal rate was 96 percent for the quarter.

The company recently unveiled the new Barracuda Email Threat Scan for Office 365, a cloud-based service that identifies latent threats, including hidden advanced persistent threats, within Microsoft Office 365 email accounts.

"Given the long-tail associated with overall Office 365 migrations (we estimate just >20 percent penetration rising to >50 percent by 2020), this product line should be a material long-term driver of core billings," the analyst added.

That said, the company talked down the notion of sustained bottom-line outperformance for the rest of the year. Citing heavy investments in the back half of the year, the company raised the top-end of the FY17 EPS guidance range only by the same amount as the beat.

However, Fishbein maintains his Buy rating on the stock as he still sees plenty of near-term drivers to push margins, EPS and the stock higher.

At last check, Barracuda was up 12.09 percent at $26.15 in Wednesday's pre-market session.

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