Deutsche Bank hikes target price on Sophos Group
(ShareCast News) - Analysts at Deutsche Bank hiked their target price on shares of Sophos Group on the heels of management's upbeat medium-term guidance and given the company's "highly predictable" subscription-based model.
In particular, the analysts highlighted how the security software and hardware outfit's business model was based on compounding growth from existing customers, given its subscription-based model.
Management had guided towards "solid" growth in billings out to fiscal year 2020 which it saw coming in at $1bn, for a compound annual growth rate of 17%, with free cash flow expected to clock in with a CAGR of 20% over that same time span.
Operating margins were also seen improving by between 100 to 150 basis points per year.
"Given the company's highly predictable subscription-based business model, we think these targets are well underpinned," analysts Alex Tout and Steve Goulden said in a research note sent to clients.
Their own industry checks also indicated that Sophos' pitch around IT security manageability was resonating strongly with its installed base of clients, with the company also gaining market share.
Its UTM product was also seen adding impetus to its Network sales.
Tout and Goulden upped their target price on the stock from 350.0p to 430.0p while reiterating their recommendation to 'buy'.