Amidst all the uncertainty gripping the markets, right now, one thing remains constant: Volatility.
One of the sectors Ives is most bullish on long-term is that of cyber security. Varonis is a pioneer in data security and analytics, and its offerings include everything from securing business data, systems management, data environments and file activity tracking.
Despite a 15% drop year-to-date, Varonis posted gains of 52% last year, following a series of impressive earnings reports. Ives believes there’s more to come and argues the “the results speak for themselves.”
While in its latest quarterly statement, the company posted modest beats on both top and bottom line, the all important ARR (annual recurring revenue) is where Varonis displayed its most impressive figures, the metric increasing by 62% year-over-year, handily above Street expectations.
Additionally, with Varonis currently transitioning to a subscription based model over perpetual licenses, the Street had high expectations, and was looking for subscriptions to be over 75% of total license revenue. Varonis beat the figure by posting an “eye popping” 82% subscription mix.
Ives said, “In the numerous software business model transitions we have seen play out over the past decade, we can never remember seeing a company so quickly ramp subscription revenues in the course of a few quarters, which speaks to a massive success story so far for the company (and its investors)… We believe Varonis’ platform offers a broad range of features and unique functionalities that differentiates it from traditional data security offerings and continues to be in the sweet spot of purchasing cycles which is starting to resonate with customers in our opinion heading into the next 12 to 18 months.”
See Varonis stock analysis on TipRanks)’ data-reactid=”23″>The Street is on the Wedbush analyst’s side. 10 Buys and 2 Hold ratings given to the data security specialist over the last three months add up to a Strong Buy consensus rating. At $100.27, the upside potential comes in at a healthy 85%. (See Varonis stock analysis on TipRanks)
Staying in cloud based services, we come to Nuance Communications, a company providing speech recognition software and artificial intelligence solutions. Despite the overall volatility in the markets, Nuance has been holding up well, among the few names to stay in the green in 2020.
The company’s latest quarterly statement was a strong one with beats across the board.
Revenue of $418.3 million beat the estimate by $12 million, while EPS of $0.27 beat the Street’s call by $0.03. Nuance’s all important cloud-based speech platform for physicians, Dragon Medical Cloud saw 51% revenue growth from the same period last year.
Nuance has also formed a partnership with Microsoft. In October the two announced an initiative to help reduce burnout among clinicians with the delivery of ambient clinical intelligence (ACI) technologies. According to the company’s press release these will “power the exam room of the future where clinical documentation writes itself.”
Ives believes that following a bumpy ride in the last decade, new CEO Mark Benjamin has engineered one of the more “impressive strategic and fundamental turnarounds” he has seen in decades.
Ives said, “We believe the underlying visibility increasing in the model from the key healthcare initiatives along with healthy profitability/cash flow lay the groundwork for a strategic organic growth reacceleration story over the coming years that should result in a further re-rating of the stock as the Street recognizes the “new and improved Nuance” story.”
Ives reiterates an Outperform on Nuance along with a $27 price target. Investors stand to take home a 82% gain, should the figure be met over the next 12 months.