Hold Rating on Varonis Systems Amid Modest ARR Guidance and Awaited Strategic Inflection

Analyst Joseph Gallo of Jefferies maintained a Hold rating on Varonis Systems (VRNS – Research Report), retaining the price target of $50.00.

Joseph Gallo has given his Hold rating due to a combination of factors that affect Varonis Systems’ current market position and future prospects. His assessment acknowledges the steady growth in the company’s Annual Recurring Revenue (ARR), which posted a 17% increase, slightly beating consensus expectations. This performance is noted as consistent with the average growth over the previous four quarters during an otherwise unpredictable earnings season. Despite this steady performance, Gallo finds the modest raise in the CY24 ARR guidance to be underwhelming, particularly since it only matches the year-over-year increase in new ARR and does not reflect a significant upward shift despite Varonis Systems’ claims of market stabilization and potential AI advancements.

The valuation of Varonis Systems at 9 times the next twelve months’ (NTM) revenue is considered fair by Gallo, given the company’s mid-teens growth rate. However, he prefers to wait for more concrete evidence that the company’s investments in Software-as-a-Service (SaaS), Managed Detection and Response (MDR), and Artificial Intelligence (AI) can substantially accelerate growth. The Hold rating reflects a cautious optimism; it implies that while the current growth trajectory is solid, it would require a more pronounced inflection in these strategic areas to justify a more bullish outlook on the company’s stock.

Gallo covers the Technology sector, focusing on stocks such as Zscaler, Palo Alto Networks, and SentinelOne. According to TipRanks, Gallo has an average return of 6.6% and a 59.65% success rate on recommended stocks.

In another report released yesterday, Robert W. Baird also assigned a Hold rating to the stock with a $50.00 price target.

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Varonis Systems (VRNS) Company Description:

Varonis Systems, Inc. engages in providing data security and analytics. It operates through the following segments: United States, EMEA, and Rest of the World. Its products includes datadvantage, data classification engine, data transport engine, Varonis edge, datanswers, datalert, dataprivilege, automation engine, and GDPR patterns. The company was founded by Yaki Faitelson and Ohad Korkus on November 3, 2004 and is headquartered in New York, NY.