The U.S. listed shares of Absolute Software (NASDAQ: ABST) (TSE: ABST) have declined about 3% year-to-date, but have still fared better than the broader market and several cybersecurity peers.
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Canada-based Absolute offers endpoint security solutions, which help organizations recover and resume normal operations in the case of security breaches. The company claims to be the “world’s only firmware-embedded endpoint visibility and control platform.” Absolute serves over 13,000 customers worldwide.
Financial Snapshot
Absolute’s Q3 FY22 (ended March 31, 2022) revenue grew 69% year-over-year to $52 million. Adjusted revenue (adjustment reflecting as if the acquisition of NetMotion occurred on July 1, 2020) grew 18%. Q3 adjusted EBITDA was up 79% to $13.8 million.
ARR, or annual recurring revenue, surged 16% (on a comparable basis) to $202.9 million. It’s worth noting that enterprise and government business accounted for 78% of total ARR and grew 18%.
Absolute ended Q3 with 13.6 million active endpoints connecting to its cloud services, reflecting an increase of 2 million devices year-over-year.
The company attributed the strength in its business to two key trends. First, a continued shift within the enterprise customers from legacy networks and security solutions to endpoint security and Zero Trust models, and second, the hybrid and remote work environment that is driving the demand for endpoint and cloud-centric security solutions.
Absolute expects adjusted revenue growth of approximately 14.9% to 15.4% in FY22.
Wall Street’s Take
Following the “strong” Q3 FY22 results, Needham analyst Scott Berg stated, “We were most impressed by commentary suggesting balanced sales across both the core Absolute resilience and the acquired NetMotion platforms.” Absolute acquired NetMotion Software, a leading provider of connectivity and security solutions, in mid-2021.
The analyst was “intrigued” by Absolute’s new Ransomware functionality, which could experience strong demand given the growing Ransomware threats.
Berg believes that improving GTM (go-to-market) strategies and product innovations will drive more sustainable and higher top-line growth for Absolute over the next several years.
In line with his optimism, Berg reiterated a Buy rating with a price target of $14.
Overall, Absolute scores a Strong Buy consensus rating backed by three Buys and one Hold. The average Absolute Software price target of $13.62 implies 48.52% upside potential from level seen before market open on Thursday.
Conclusion
Absolute’s enhanced product offerings, a growing customer base, and the rising need for endpoint security solutions amid increased cyber threats bode well for its long-term growth.
However, macro headwinds and an impending recession could have an adverse impact on cybersecurity spending and hurt Absolute’s growth.
As per TipRanks’ Insider Trading tool, the Insider Confidence Signal is Very Negative for Absolute Software based on nine informative insider transactions over the last three months. Overall, corporate insiders sold shares worth C$2.8 million in the last three months.
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