CyberArk Rises After Second Upgrade In As Many Days

Shares of CyberArk Software (CYBR) are on the rise after Goldman Sachs analyst Gabriela Borges upgraded the stock to Buy, stating that she sees it as one of the best secular growth stories in IT security. This follows Evercore ISI's upgrade yesterday, with analyst Ken Talanian upping his rating for CyberArk to Outperform, citing tailwinds ahead.

BUY CYBERARK: In a research note this morning, Goldman Sachs's Borges upgraded CyberArk to Buy from Neutral, calling the company one of the best secular growth stories in IT security today. The analyst told investors that she expects the company's business to be stronger than the Street forecasts this year, catalyzed by the move to hybrid environments, which require more elegant solutions for managing cloud infrastructure and cloud application credentials. Further, Borges noted that she expects "a series of beat and raise quarters" to drive the stock higher, and pointed out that adoption in Europe should pick up in the second half of 2017 ahead of new breach regulation in 2018. The analyst also raised her price target on the shares to $64 from $57. This upgrade is the second in as many days, as yesterday Evercore ISI analyst Ken Talanian upgraded CyberArk to Outperform from In Line and raised his price target to $60 from $51. The analyst told investors that the upcoming implementation of the EU's General Data Protection Regulation is a tailwind for all security companies and CyberArk should be a beneficiary. Additionally, Talanian said customer expansion sales remain a tailwind, with his current billings estimates appearing reasonable and results implying conservative new customer contributions. Not as bullish on CyberArk was Morgan Stanley analyst Melissa Gorham, who initiated coverage of the stock this morning with an Equal Weight rating and a $55 price target. The analyst argued that while strong secular trends in privileged access security and a large greenfield opportunity should enable more than 20% revenue growth for the company over the next several years, the stock current valuation levels already reflect this growth.

WHAT'S NOTABLE: This morning, Goldman Sachs's Borges changed her rating on another security name, downgrading SecureWorks (SCWX) to Neutral from Buy as visibility into medium-term profitability has been pushed out given increased investments in sales and marketing this year. Additionally, Borges pointed out that SecureWorks' monthly recurring revenue is tracking well below her original forecasts on longer deal cycles and weaker sales momentum, and the company is no longer outgrowing the industry. The analyst lowered her price target on the shares to $12.50 from $15. Goldman's Borges is among several on the Street who are less bullish on SecureWorks in the wake of its earnings report last night, as analysts at Barclays and BofA Merrill Lynch also downgraded the stock this morning.

PRICE ACTION: In late morning trading, shares of CyberArk have gained almost 2% to $50.98, while SecureWorks has dropped about 8% to $9.51 per share.