Shares of data protection and security software company Varonis (NASDAQ:VRNS) jumped 10% in the morning session after the company reported third-quarter results that exceeded analysts' revenue, billings, free cash flow, and EPS estimates. Despite macro challenges, the company continued to make progress on its transition to a subscription-based model with a SaaS mix at 66% of revenues (versus guidance of 60%). On the other hand, despite the improvements, its full-year revenue guidance missed Wall Street's estimates. Overall, this was a mixed quarter for Varonis, though the progress made on transitioning to a SaaS model is promising.
Following the results, Wedbush analyst Daniel Ives upgraded the stock's rating from Neutral to Outperform and raised the price target from $35 to $65. The new price target represents a potential 30% upside from where shares traded when the upgrade was announced. He added, "On the heels of another strong quarter with further evidence the model transition is hitting its next gear of growth and also the AI Revolution will give VRNS a clear tailwind over the next 12 to 18 months in our view."
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What is the market telling us:
Varonis's shares are quite volatile and over the last year have had 9 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the company gained 7.7% on the news that Morgan Stanley upgraded the stock's rating from Equal Weight (Neutral) to Overweight (Buy).
Varonis is up 9.2% since the beginning of the year. Investors who bought $1,000 worth of Varonis's shares 5 years ago would now be looking at an investment worth $2,320.
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