Stock Review of the Day
Stock:  CYBR (CyberArk)
Summary:  WATCH

Score:  16/20
MOS:  33%
Share Price:  $112
Sticker Price:  $168

CyberArk is an enterprise cyber security SaaS with a global headquarters based in Petah Tikva, Israel and a US headquarters based in Newton, MA.  They were founded in 1999 and currently have over 1,300 employees.  Today, their platform is used by over 5,000 customers and the primary industries they serve include financial, energy, retail, healthcare, and government.

I hold CyberArk in my portfolio for numerous reasons.  Although the stock is classified as a WATCH, I have not sold it and here is why:

1.  CyberArk is classified as an enterprise SaaS.  Enterprise means they serve large corporations.  Some of CyberArk’s customers include PWC, Motorola, Duracell, Revlon, AVIS, BRAUN, and Qualcomm.  SaaS is Software as a Services which is a monthly or annual recurring revenue model.  When it comes to enterprise SaaS, large corporations typically sign contracts that extend over years.  That timeline is usually between 3 – 10 years.  The annual cost can range between hundreds of thousands on up to millions of dollars per year for just one corporate customer.  Overall, enterprise SaaS is highly profitable and scalable.

2.  Cyber security is highly in-demand and will continue to remain in-demand.  If a company were to let it’s “guard down” on cyber security, a breach could literally cripple the company overnight.

I’m about to share a story with you that is absolutely true.  I cannot reveal any names or even the industry but I hope you find this educational and entertaining!

A friend of mine works for a publicly traded company and in 2019 the CTO (Chief Technology Officer) did not renew their contract to keep their cyber security software up-to-date.

Within a month, an “event” occurred.  The entire company network was shut down and all employees were locked out due to a cyber security breach.  In other words, they were hacked.  Operations and revenue came to a screeching halt.  Everyone was freaking out like the end of days was upon us.  Then, that same day, an email arrived in the CEOs inbox stating that all rights and privileges will be returned on ransom.  The ransom payment came in at the tune of several million dollars and was to be paid via Bitcoin which would mean no paper trail.

Guess what happened?

Yes, the company paid the ransom to have all rights and privileges returned.  They had no choice because tracking the intrusion source was next to impossible.

Because the event happened in such a short time span, the story never hit the media.

As for the CTO, I’m not sure if he lost his job but I can tell you this, the first thing they did was renew their cyber security contract.

Lesson learned?  I sure hope so.

Believe it or not but events like this happen all the time and never hit the media but there are circumstances where stories like this do hit the media including the following:

  1. Heartland Payment Systems in 2008 – 134 million customers had their credit card numbers exposed.
  2. LinkedIn in 2016 – 6.5 customers had their passwords exposed.
  3. Equifax in 2017 – 147 million customers had their security security numbers, birth dates, and addresses exposed.

Do not underestimate the importance of cyber security.

3.  Within TYKR, CyberArk’s financials are very strong, with a score of 16/20.  Arriving above a score of 10 is considered good but if a company can get above 15, they can potentially arrive on the TOP 50 ON SALE.  The reason CyberArk is not on the TOP 50 ON SALE is because they are classified as WATCH.  The MOS is currently at 33%.  Yes, they are on sale but not by the desired 50% or more.  In this case, I’m okay with this as I know the importance of cybersecurity.

4.  On 9/24/2020 AWS (Amazon Web Services) announced that CyberArk achieved AWS Outposts Ready Designation.  This is a big deal for CyberArk.  AWS is the largest cloud hosting platform on the market, followed my Microsoft’s Azure.  Some of the customers that use AWS include Netflix, LinkedIn, Facebook, BBC, and ESPN.  And to top off their customer list, the CIA (Central Intelligence Agency) signed a 10 year contract with AWS back in 2013.

As quoted by a senior manager at AWS “We know the importance of helping customers and organizations more easily identify potential security risks in order to take action, with CyberArk available to customers on AWS Outposts, we are able to provide a comprehensive view of a customer’s security posture on their infrastructure.”  You may read the full article on Yahoo Finance.

Although they are classified as WATCH because the MOS is not greater than 50%, that score of 16/20 shows their financials are very strong.  At a minimum, put this stock on your watchlist.  Although it’s a WATCH today, it could soon transition into ON SALE.

What do you think?

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Blog Post Author
Sean Tepper