Mimecast's Enterprise Potential Is Underappreciated

“While Mimecast Ltd (NASDAQ: MIME) came into prominence by providing email solutions to midmarket customers (SMB/SMEs), we believe Mimecast’s growing enterprise business is underappreciated,” Summit Redstone’s Srini Nandury said in a note, while initiating coverage of the company with a Buy rating and price target of $30.

A Good Product

Describing Mimecast as a “an innovative and pure play email security-as-a-service vendor,” the analyst mentioned that discussions with several clients revealed that customers appreciate and trust the product, and say that the solution is “almost as good as” the one offered by Proofpoint Inc (NASDAQ: PFPT), while being priced lower.

Nandury explained that Mimecast’s multi-tenant platform is organically built for the cloud and is potentially among the best in the industry.

“Given that email is one of the most targeted vectors, Mimecast technology and its products are known to secure email effectively for companies of all sizes,” the analyst stated.

Growth Runway

In addition, with high revenue retention rates of more than 110 percent and a large total addressable market of $11.5 billion, the company has a long runway for growth in the years to come.

Nandury also believes consensus expectations could prove to be conservative, with the forecasted revenue growth at 25 percent and 21 percent, respectively, for fiscal 2018 and 2019.

The analyst expects Mimecast to grow consistently at more than 30 percent, on a constant currency basis.

“We expect Mimecast to beat and raise estimates, which should lead to multiple expansion and price appreciation,” Nandury added.

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