The shares of IT security company Imperva (IMPV) are climbing after the company reported stronger than expected third quarter results and said that it would implement a restructuring initiative. Additionally, the company announced that it would not sell itself after concluding its review of strategic alternatives. Research firms Evercore ISI and Macquarie responded to last night's quarterly report and announcements by upgrading the stock, but JPMorgan remains cautious on the company's outlook.
RESULTS, COMMENTS: Imperva reported Q3 EPS of 8c, versus the consensus estimate of a (16c) per share loss. The company's revenue came in at $68M, versus the consensus outlook of $63M. For fiscal 2016, Imperva expects to report an EPS loss of (38c)-(35c), versus the consensus estimate of an (80c) per share loss. The company estimated that its fiscal 2016 revenue would be $255M-$257M, compared with the consensus estimate of $250M. Meanwhile, Imperva announced that it would implement a restructuring initiative which will focus on cost cutting. The company said that the initiative is designed to boost its profitability and competitiveness. Additionally, Imperva announced that, after concluding its strategic review, it had decided not to sell the company.
UPGRADES: Evercore ISI analyst Ken Talanian upgraded Imperva to Buy from Hold. The company said that its revenue should jump at least 20% in fiscal 2017, while its fiscal 2016 guidance suggests that its revenue will not deteriorate any further this year, Talanian wrote. Moreover, Imperva's restructuring initiative is expected to save at least $15M per year, enhancing its profitability, he believes. The analyst kept a $45 price target on the shares and upgraded the stock after it fell significantly below the price target. Macquarie analyst Sarah Hindlian upgraded Imperva to Outperform from Neutral. Hindlian upgraded Imperva based on the subscription growth of its cloud-based security product, Incapsula. Noting that the product is growing 100%+ each year, she raised her price target on the shares to $50 from $45.
JPMORGAN CAUTIOUS: After Imperva concluded its strategic review, investors' focus will turn to the company's growth outlook, wrote JPMorgan analyst Sterling Auty. The analyst believes that the company's results were encouraging since they do not appear to have been boosted by discounted prices. However, the company said that it continues to need a great deal of time to close its sales, suggesting that it could have difficulty turning around its core business, warned Auty, who kept a Neutral rating on the stock.
OTHERS TO WATCH: Other publicly traded IT security companies include Barracuda (CUDA), Check Point (CHKP), F5 Networks (FFIV), FireEye (FEYE), Fortinet (FTNT), Palo Alto Networks (PANW), Proofpoint (PFPT), Qualys (QLYS) and Symantec (SYMC).
PRICE ACTION: In morning trading, Imperva rose nearly 4% to $36.45 per share.
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