On Wednesday, TD Cowen revised its outlook. Qualis Co., Ltd. Qualys cut its price target for cybersecurity company Qualys (NASDAQ: NASDAQ:) to $140 from $170 but maintained a hold rating on the stock. The revision comes after the company’s second-quarter 2024 results revealed reduced demand for its standalone vulnerability management (VM) core product.
The company’s recent earnings report showed worrying trends, with revenue growth declining 2% year over year. This performance fell well short of market expectations of positive 8% year over year growth. In light of these results, management has lowered its full-year 2024 revenue forecast by 100 basis points, now expecting 8% year over year growth.
The lowered revenue outlook and declining market share led TD Cowen to reassess the investability of Qualis shares. The firm’s analysts noted that the rapid decline in demand for Qualis’s flagship product and the pace of market share loss were the main factors influencing their decision to lower their target price.
The analyst’s statement highlighted the challenges facing Qualys: “Q2’24 results indicate accelerating softening of demand for Qualys’ standalone VM core products, posting negative growth of -2% YoY, well below the consensus of +8% YoY. Management has lowered its FY24 revenue guidance by 100 basis points to 8% YoY growth, but we believe this is still de-risked given the pace of market share decline.”
The price target revision reflects concerns about the company’s valuation, with the analyst pointing to “multiple contractions” as the reason for the revision. Despite these challenges, TD Cowen is signaling that it believes the stock still offers some value for investors, even if growth expectations are muted.
In other recent news, cloud security company Qualys has made some important progress. The company reported that second-quarter revenue grew 8% year over year, despite a 2% decrease in current compute billings. Analysts at Canaccord Genuity adjusted their price target on Qualys to $160 from $220 and maintained a buy rating. Similarly, RBC Capital and JP Morgan revised their price targets to $150 and $125, respectively, due to recent financial results and future expectations.
Qualys has made great strides with its cybersecurity products, launching TruRisk Eliminate, a product aimed at enhancing vulnerability management. The company also plans to expand its GovCloud platform to more federal agencies and launch a new customer acquisition campaign. These are all recent developments that investors should keep an eye on for upcoming updates.
Additionally, Qualys expects annual revenue to grow 8-10% in 2024, projecting figures between $601.5 million and $608.5 million. Canaccord Genuity predicts that growth prospects will improve even further in the coming years as Qualys continues to develop its cybersecurity platform. However, these projections are analyst opinions and should be considered as such.
InvestingPro Insights
Following TD Cowen’s recent adjustment to its outlook for Qualys Inc, a closer look at the company’s financials and market performance using InvestingPro data can provide further insights. Qualys boasts a robust gross margin of 81.5% over the trailing 12 months to Q2 2024, signaling strong cost management and business profitability. Despite a recent dip in demand for the company’s core products, the company’s financials reflect healthy revenue growth of 10.83% over the same period.
However, the market has reacted to the company’s challenges, with Qualys’ shares declining sharply by over 8% over the past week, reflecting investors’ immediate sentiment. This, combined with a year-to-date decline of 30.15%, suggests that the market is significantly reassessing the company’s prospects.
For investors looking for potential value, Qualys is trading at a price-to-earnings (P/E) ratio of 26.97. This translates into a low price-to-earnings ratio when considering near-term earnings growth. This could indicate that the stock may be undervalued relative to its earnings potential. Additionally, Qualys has more cash than debt, providing a cushion and financial flexibility in tough market conditions.
Investors interested in a more in-depth analysis can find more InvestingPro tips on Qualys, including insights on valuation multiples and profitability forecasts, on Investing.com. There are currently 13 more InvestingPro tips that provide a comprehensive view of the company’s financials and market position.
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