CYBR: Pending Platform Integration Seen Supporting AI Security Upside Potential

Analysts have trimmed their price targets on CyberArk, and our updated fair value estimate reflects this with a move from about $485 to $475, as they adjust growth, margin, and P/E assumptions following recent target cuts from several firms.

Analyst Commentary

Recent Street research on CyberArk clusters around lower price targets, with analysts updating their models after the company became part of a pending acquisition discussion in broader security and observability software. The tone of the research is more about recalibration than a shift in the core thesis, and you can see that in how they talk about valuation and execution risk.

Bullish Takeaways

Bullish analysts still frame CyberArk as a valuable asset in security, with the pending deal viewed as a sign that larger platforms see incremental value in its capabilities and customer relationships.
Some research around related transactions in security and observability software highlights that buyers are prepared to pay what one firm described as "not cheap" prices for quality assets, which indirectly supports the idea that CyberArk commands a meaningful strategic premium.
References to leverage and fit with larger platforms suggest that CyberArk’s offerings are seen as complementary to broader security suites, which can support arguments for durable demand and potential revenue synergies in combined entities.
The continued focus on CyberArk within research discussing other large security deals indicates that it remains central to investor conversations, which can help support interest in the name even as models are reset.

Bearish Takeaways

Bearish analysts have moved price targets down by amounts such as US$44, US$50 and US$60, and in one case from US$455 to US$411, signaling that prior assumptions on growth, margins or P/E may have been too optimistic.
The cluster of target cuts suggests rising caution on how much investors should be willing to pay for CyberArk’s earnings stream relative to its peers, even if the fundamental story is intact.
Comments that a related software acquisition price is "not cheap" highlight growing sensitivity to valuation in security and observability deals, which may cap how aggressive analysts are willing to be on CyberArk’s upside case.
By revising targets lower while still discussing CyberArk in the context of expensive sector deals, bearish analysts are effectively flagging a tighter margin for error on execution and integration, especially around how quickly any combined business can justify premium pricing multiples.

What's in the News

The U.S. administration is reported to be weighing the idea of involving private companies in cyberwarfare activities. This could influence how security vendors like CyberArk are viewed in future government and critical infrastructure discussions (New York Times).

Valuation Changes

Fair Value Estimate: Trimmed slightly from about US$485.24 to about US$474.79, a move of roughly US$10.
Discount Rate: Adjusted marginally lower from about 10.81% to about 10.67%, implying a small shift in the required return used in the model.
Revenue Growth: Kept broadly similar, with the assumption moving from about 18.61% to about 18.56%, a minimal change.
Net Profit Margin: Raised from about 3.94% to about 4.78%, indicating a slightly more optimistic view on future profitability.
Future P/E: Reduced from about 408.80x to about 320.35x, indicating a less aggressive multiple applied to expected earnings.

Strategic acquisitions and R&D in AI and machine identities bolster CyberArk's identity security offerings, enhancing revenue through cross-selling and market expansion.
Focus on unified identity security platform and machine identity market positions CyberArk for significant growth and improved margins as customers consolidate identity solutions.
Integration risks with acquisitions, increasing market competition, and evolving cybersecurity threats could impact CyberArk's financial performance and operational complexity.

Catalysts

About CyberArk Software

Develops, markets, and sells software-based identity security solutions and services in the United States, Europe, the Middle East, Africa, and internationally.What are the underlying business or industry changes driving this perspective?

The integration of Venafi and Zilla Security into CyberArk is expected to enhance its competitive position in identity security, allowing for revenue growth through cross-selling opportunities within its existing customer base and expanding its total addressable market.
The acquisition of Zilla Security is aimed at addressing longstanding inefficiencies in identity governance administration (IGA), which is expected to reduce operational complexity and improve CyberArk's net margins by offering faster deployment and integration than traditional IGA solutions.
The evolving machine identity market, coupled with CyberArk’s focus on AI-driven identity security through its machine identity capabilities and Secrets Management, is expected to drive significant revenue growth as organizations seek integrated solutions to manage increasingly complex identity security needs.
CyberArk's unified identity security platform, which includes privileged access management and workforce security, is expected to drive higher average deal sizes, revenue growth, and improved net margins as customers increasingly consolidate their identity security solutions with trusted vendors.
Ongoing investment in research and development, especially in areas like AI and machine identities, is set to provide CyberArk with innovative solutions to capture new market opportunities, boosting future earnings through product differentiation and improved customer trust.

CyberArk Software Earnings and Revenue Growth

CyberArk Software Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming CyberArk Software's revenue will grow by 19.9% annually over the next 3 years.
Analysts assume that profit margins will increase from -13.8% today to 4.7% in 3 years time.
Analysts expect earnings to reach $96.6 million (and earnings per share of $2.13) by about September 2028, up from $-165.4 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $128.2 million in earnings, and the most bearish expecting $-83.6 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 397.9x on those 2028 earnings, up from -138.9x today. This future PE is greater than the current PE for the US Software industry at 36.6x.
Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.87%, as per the Simply Wall St company report.

CyberArk Software Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The integration of Venafi and Zilla Security into CyberArk's operations presents execution risks which could impact the company's ability to achieve projected synergies and financial outcomes, potentially affecting revenue and net margins.
Increasing competition in the identity security market and pressure to expand its platform rapidly could lead to increased operational complexity, adversely impacting earnings if not managed properly.
The cybersecurity landscape is highly dynamic, with evolving threats and the need for quick adaptation. Delays or missteps in product development or market response due to these complexities could negatively affect customer adoption and revenues.
The dependency on SaaS applications and cloud environments involves significant risk related to security and regulatory changes, which could impact operational costs and net margins if not effectively addressed.
The company faces potential macroeconomic uncertainties, such as fluctuating currency rates which impacted ARR by $2 million as mentioned, affecting overall earnings and financial stability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $462.534 for CyberArk Software based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $551.0, and the most bearish reporting a price target of just $415.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $96.6 million, and it would be trading on a PE ratio of 397.9x, assuming you use a discount rate of 10.9%.
Given the current share price of $455.55, the analyst price target of $462.53 is 1.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Pending Acquisition Will Shape AI Security Position Amid Mixed Industry Outlook