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Why CyberArk (CYBR) Declined Over 15% in the Last 10 Days?

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It has been over 10 days since CyberArk Software Ltd. (CYBR - Free Report) reported first-quarter 2017 results. Following the release, the stock has been witnessing a decline.

To some investors, choosing the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors’ radar. While better-than-expected results make the stock a good pick, lower-than-expected results dampen investors’ spirit. So, the period following earnings releases is often marked by high market activity.

Shares Plunging

CyberArk reported its quarterly numbers on May 11 after the market closed, following which its shares have lost over 15.8% of value, so far. Notably, the stock has underperformed the Zacks categorized Computer Software – Services Market industry in the year-to-date period. While the industry gained 16.4%, CyberArk gained just 1.9% in the said period.

Although the company reported strong first-quarter results, its tepid second-quarter view and downbeat earnings guidance for the full year has made investors worried over growth opportunities.

The company is expecting revenue growth of just 21–23% in the second quarter. In addition, it lowered non-GAAP operating income and earnings per share guidance ranges for the full year. All this has made investors skeptical about the company’s near-term performance.

Downward Estimate Revisions

Over the last 30 days, the Zacks Consensus Estimate for the second quarter and full-year 2017 witnessed downward revisions. For the second quarter, the Zacks Consensus Estimate is currently pegged at 13 cents, which is lower than earnings of 19 cents projected 30 days ago. Similarly, the Zacks Consensus Estimate for 2017 is currently pegged at 69 cents compared with 77 cents projected 30 days ago.

Bottom Line

CyberArk is currently benefiting from a healthy security market, solid product lineup, deal wins and investment plans. Furthermore, the company’s strategy of growing through acquisitions is encouraging. Additionally, investments in product suite and go-to-market are other positives for the company.

However, the company’s slowing down revenue growth rate makes us increasingly cautious over its near-term performance. It should be noted that for the last two quarters the company reported the slowest revenue growth rate of around 25% since it was enlisted in Sep 2014. Prior to this, CyberArk had witnessed over 35% revenue growth every quarter.

Therefore, we suggest investors to stay away from investing in this stock unless we notice some positive growth factors which have potential to drive its top- and bottom-line performances.

Currently, CyberArk carries a Zacks Rank #4 (Sell).

Some better-ranked stocks worth considering in the Computers – IT Services space are DXC Technology (DXC - Free Report) , Palo Alto Networks (PANW - Free Report) and EPAM Systems (EPAM - Free Report) . While DXC Technology sports a Zacks Rank #1 (Strong Buy), Palo Alto Networks and EPAM Systems carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXC Technology, Palo Alto Networks and EPAM Systems have a long-term expected EPS growth rate of 8%, 27.9% and 20%, respectively.

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