Barracuda Networks Inc. (NYSE:CUDA) a Big Buy after Earnings

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CUDA stock logo barracuda networksBarracuda Networks Inc. (NYSE:CUDA) popped after hours Tuesday after reporting strong earnings. CUDA stock looks like it will keep its momentum going, too, as this cybersecurity and data services company continues growing its top and bottom line.

CUDA earnings showed both profit and revenue that topped Wall Street estimates, including earnings per share of 21 cents over forecasts of just 13 cents per share. Barracuda Networks also saw revenue grow 12% to $87.9 million over projections of just $85.3 million.

Gross billings also grew nicely, hinting at future growth for CUDA stock, and active subscribers to the tech stock’s services were up 14% year-over-year. The icing on the cake was strong forward guidance, which really got the rally started in earnest for this cybersecurity play.

There’s so much to like about Barracuda stock after this earnings report, as the numbers show. But share price momentum is also very much on investors’ side right now, too.

CUDA is  up 24% since Jan. 1 even accounting for a huge drop in the first week or so of 2016, and shares are actually up more than double from the 52-week low set early in the year. Despite this run, however, the charts show Barracuda’s relative strength is still pretty middle of the road and shares are not grossly overbought. Equally important, the forward P/E of this high growth stock is in the high 30s — elevated compared with staples stocks, yes, but a premium for growth in tech is common.

And let’s not forget that many peers of Barracuda Networks Inc. such as CommVault Systems, Inc.(NASDAQ:CVLT) and Nutanix Inc (NASDAQ:NTNX) aren’t even turning a profit yet. Also, other data and security plays like Palo Alto Networks Inc (NYSE:PANW) have struggled to keep investors happy and have underperformed in 2016.

I would be comfortable holding CUDA to ride this run higher, but it’s also important to acknowledge that as $1 billion company it’s also ripe for acquisition. Hopes of a buyout from bigger enterprise tech firms like Oracle Corporation (NYSE:ORCL), Cisco Systems, Inc.(NASDAQ:CSCO) or Microsoft Corporation (NASDAQ:MSFT) are not just a necessity for a company burning cash, so Barracuda Networks can bide its time and weather what comes until it gets a good deal.

Regardless of buyout interest, however, there’s great growth ahead for CUDA stock in an environment where there’s not a lot of companies out there expanding earnings and sales. Remember, cybersecurity is a big focal point on the 2016 election as there’s concern about hackers from Russia interfering with our government, and no business or organization can be without great data protection in this day and age.

Investors should be very encouraged by the latest Barracuda Networks Inc. earnings, and by its strong position in the current security environment. CUDA stock is a strong buy.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/cuda-stock-barracuda-networks-inc-earnings/.

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