A Cybersecurity Earnings Preview

A number of cybersecurity companies are scheduled to report Q3 earnings this week.

“We’re expecting generally in-line results across the space,” BTIG’s Joel P. Fishbein said in a report. Shares in the sector came under pressure after Fortinet Inc (NASDAQ: FTNT) issued a profit warning.

Cybersecurity issues will likely continue in the foreseeable future, and cloud/internet businesses will increasingly contract cybersecurity firms to keep their businesses running.

HubSpot

The analyst expects HubSpot Inc (NYSE: HUBS) to report revenue growth ahead of the 41 percent year-over-year estimate. While billings growth could decelerate to 35 percent year-over-year in H2, from 51 percent year-over-year in H1, total customer growth could exceed the 28 percent year-over-year estimate.

“We anticipate continued uptake of the company’s platform in the SMB segment, although growth moving forward is expense intensive with plans of increasing headcount, continued international expansion, and maintaining a cost heavy services business,” the BTIG report stated.

Fishbein maintained a Neutral rating on the company. In a note earlier this month, DA Davidson initiated coverage of HubSpot with a Buy rating, saying the company was a marketing software leader.

FireEye

Fishbein mentioned checks indicated mixed results for FireEye Inc (NASDAQ: FEYE), but this already seems to be reflected in the company’s current share price. He maintained a Buy rating on the company, with a price target of $17.

While FireEye continues to face challenges in driving revenue growth, the ongoing transition away from product revenue from physical appliances towards subscription-based revenue from software could drive more visibility.

“Uneven top-line results aside, we’re still positive on the operating leverage potential of what continues to be an unprofitable model. There are still plenty of costs that can be taken out, and we think there’s significant opportunity for operating leverage and for value creation in the shares, even if revenue growth remains sluggish,” the analyst commented.

Imperva

Imperva Inc (NYSE: IMPV) will likely report in-line results. Fishbein added that with M&A being temporarily put on hold, investors are likely to refocus on fundamentals. The company had significantly reduced its full-year revenue guidance last quarter. Employee turnover remained a challenge in recent weeks.

“All together, given the major reset to numbers and what looks to be a relatively low bar, we expect results to come in generally in line with guidance. We will look for any indications around the underlying health of the business, including any commentary on customer buying behavior and how the company is dealing with the aforementioned turnover issue,” the analyst wrote.

Qualys

Fishbein expects Qualys Inc (NASDAQ: QLYS) to report solid results, with 19 percent year-over-year revenue growth and 17 percent year-over-year billings growth, ahead of the estimates.

“Our checks indicate that new products, including the Cloud Agent platform and Threatprotect, are generating positive initial momentum. Overall, we will look toward average deal size and multi-product customer metrics to assess the company’s growth in the enterprise,” the BTIG report mentioned.

The analyst believes Qualys’ margins would remain in the low 20 percent range in the near term due to investments in products and go to market strategy.

Symantec

Symantec Corporation (NASDAQ: SYMC) will likely report its Q3 results in-line with to slightly ahead of expectations.

“Bigger picture, we continue to like Symantec for both bottom and top-line improvements that we see occurring as the Blue Coat integration progresses,” Fishbein commented.

Since Symantec is in an integration phase, margins could remain under pressure while the company works on cost synergies. The analyst believes that the company’s margins would improve over time and cross the 30 percent mark in FY18. “Net, we think the stock should continue to re-rate as investors get more comfortable with the extent and impact of the cost savings with potential upside if revenue synergies materialize.”

Fishbein maintained a Buy rating on the company, with a price target of $28.

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