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Proofpoint (PFPT) on Growth Trajectory: Should You Hold?
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A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is Proofpoint Inc. . Although there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
The stock returned approximately 47.6% in the last one year, outperforming the Zacks categorized Computer-Software industry’s gain of just 21.8%.
Let’s look at the reasons behind Proofpoint’ solid momentum.
What’s Driving the Stock?
Proofpoint is a leading security-as-a-service provider that focuses on cloud-based solutions for threat protection, compliance, archiving & governance, and secure communications.
According to a Markets and Markets report, worldwide cyber security spending will reach $101 billion in 2018 and $170 billion by 2020. Gartner had earlier shared that IT security spending peaked to $75 billion in 2015. The favourable trend in the space is a tailwind for Proofpoint.
Going forward, Proofpoint’s top-line growth has been remarkable as a result of sustained focus on launching new products, acquisitions and partnerships.
Proofpoint made strategic acquisitions to expedite growth. In Oct 2016, the company signed a definite agreement to acquire FireLayers, an innovator in cloud security. Prior to that, in Aug 2016, it acquired the Email Fraud Protection (EFP) business unit from Return Path. In 2015, the company made two important acquisitions – Emerging Threats, a leading provider of advanced threat intelligence, and Socialware, a leading provider of social media compliance solutions. Besides these, last year, Proofpoint also purchased certain assets from Marble Security Inc. and Emerging Threats Pro, LLC. We believe that the aforementioned acquisitions not only expanded Proofpoint’s product portfolio but also its customer and revenue base.
Notably, the company is on a growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals. It posted a positive earnings surprise in three out of the last four quarters, with an average positive surprise of 13.3%.
Given that the company’s long-term earnings per share growth rate is 25.75% and has a Growth Style Score of “A”, we believe that the stock still has much upside potential.
Risks Remain
Proofpoint faces competition from numerous big and small companies in the security application market. As Internet threats and attacks increase, stiff competition will follow suit. Competing firms must come up with prompt and advanced technologies to suit customer requirements and expedite product introduction in order to survive. Moreover, we believe that Proofpoint’s dominance could be challenged by new entrants. This could lead the company to resort to competitive pricing to maintain and capture market share.
Bottom Line
Considering these positives, we believe that Proofpoint is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive price.
Proofpoint carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Micron Technology, Inc. (MU - Free Report) , Applied Materials, Inc. (AMAT - Free Report) andTech Data Corporation , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron, Applied Materials and Tech Data have a long-term expected earnings growth rate of 10%, 15.5% and 22.8%, respectively.
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While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' scret trade>>
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Proofpoint (PFPT) on Growth Trajectory: Should You Hold?
A successful portfolio manager understands the importance of adding well-performing stocks at the right time. Indicators of a stock’s bullish run include a rise in its share price and strong fundamentals.
One such stock that investors need to hold on to right now is Proofpoint Inc. . Although there are a few concerns, these are short-lived. So, the stock has the potential to perform well in the long run.
The stock returned approximately 47.6% in the last one year, outperforming the Zacks categorized Computer-Software industry’s gain of just 21.8%.
Let’s look at the reasons behind Proofpoint’ solid momentum.
What’s Driving the Stock?
Proofpoint is a leading security-as-a-service provider that focuses on cloud-based solutions for threat protection, compliance, archiving & governance, and secure communications.
According to a Markets and Markets report, worldwide cyber security spending will reach $101 billion in 2018 and $170 billion by 2020. Gartner had earlier shared that IT security spending peaked to $75 billion in 2015. The favourable trend in the space is a tailwind for Proofpoint.
Going forward, Proofpoint’s top-line growth has been remarkable as a result of sustained focus on launching new products, acquisitions and partnerships.
Proofpoint made strategic acquisitions to expedite growth. In Oct 2016, the company signed a definite agreement to acquire FireLayers, an innovator in cloud security. Prior to that, in Aug 2016, it acquired the Email Fraud Protection (EFP) business unit from Return Path. In 2015, the company made two important acquisitions – Emerging Threats, a leading provider of advanced threat intelligence, and Socialware, a leading provider of social media compliance solutions. Besides these, last year, Proofpoint also purchased certain assets from Marble Security Inc. and Emerging Threats Pro, LLC. We believe that the aforementioned acquisitions not only expanded Proofpoint’s product portfolio but also its customer and revenue base.
Notably, the company is on a growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals. It posted a positive earnings surprise in three out of the last four quarters, with an average positive surprise of 13.3%.
Given that the company’s long-term earnings per share growth rate is 25.75% and has a Growth Style Score of “A”, we believe that the stock still has much upside potential.
Risks Remain
Proofpoint faces competition from numerous big and small companies in the security application market. As Internet threats and attacks increase, stiff competition will follow suit. Competing firms must come up with prompt and advanced technologies to suit customer requirements and expedite product introduction in order to survive. Moreover, we believe that Proofpoint’s dominance could be challenged by new entrants. This could lead the company to resort to competitive pricing to maintain and capture market share.
Bottom Line
Considering these positives, we believe that Proofpoint is one such technology stock that deserves a place in investors’ portfolio. We can essentially filter the negatives and focus on the positives which drive price.
Proofpoint carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Micron Technology, Inc. (MU - Free Report) , Applied Materials, Inc. (AMAT - Free Report) andTech Data Corporation , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron, Applied Materials and Tech Data have a long-term expected earnings growth rate of 10%, 15.5% and 22.8%, respectively.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' scret trade>>