Actionable insights straight to your inbox

Equities logo

Proofpoint Builds Subscription-Based Cybersecurity

The stock is doing well because of market share gains, new product advancements, accretive acquisitions and high renewal rates.

Proofpoint (PFPT) is a $6 billion market-cap security-as-a-service provider with increasingly popular subscription-based security solutions, notes leading growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

The stock is doing well because of market share gains, new product advancements, accretive acquisitions and high renewal rates, all of which add up to estimated revenue growth rates of 35% this year and 28% in 2019.

The company’s emerging solutions (email fraud defense, social media protection and threat response) are just one of the attractions as they are fueling growth above Proofpoint’s core offering of email protection.

But investors have also been pleasantly surprised by the recent acquisition of Wombat Security, which specializes in phishing simulation and computer-based security training.

Analysts believe Wombat is growing at around 50%, which will help extend Proofpoint’s growth streak, as will accelerating adoption of Microsoft Office 365, for which Proofpoint offers a variety of threat protection and compliance-related solutions. Finally, we’d note that cybersecurity remains at the top of the list for stable IT spending by large companies.

With Proofpoint’s solid growth profile, good story and booming free cash flow (the company expects about $3 per share this year, up 30%), we see the name remaining at the top of big investors’ buy lists.

Technically, Proofpoint spent the greater part of 2017 trading in the $80 to $90 range, then finally broke above resistance in late-January. The market’s early-2018 pullback dragged shares back to their 50-day line, but they quickly bounced back above $100 and walked up to $124 by mid-March as solid earnings, and news of the Wombat acquisition, drove a wave of fresh buying.

A modest pullback over recent weeks never cracked the stock’s 50-day line, and the stock bounced nicely in recent days even as the market continued to wobble. PFPT looks like a leader in the strong cybersecurity sector—you can buy a little around here.

Mike Cintolo is editor of Cabot Top Ten Trader.

Subscribe to Mike Cintolo’s Cabot Top Ten Trader here…

About Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.

A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.