Canaccord Genuity bumps up target price on Corero Network Security

Canaccord Genuity said Corero's January trading update suggested a "strong margin improvement" in the second half of 2021 and added that today's 2021 results highlighted maiden profits, with adjusted underlying earnings of $3.2m and 24% organic revenue expansion against a strong 2020 comparative.

The Canadian bank, which stood by its 'buy' rating on the stock, stated Corero's profitability metrics benefited from "a richer mix", with ongoing growth in software-only sales expanding gross margins to 85% in the year.

Although opex was broadly flat, the analysts anticipate recent sales, marketing and partner channel investments in future growth will expand this from here.

Canaccord said the demand environment remained "favourable" as frequency, complexity, and severity of DDoS attacks continue to increase and cybersecurity has been elevated to board-level priority.

"In addition, our analysis shows increasing regulatory pressure in Corero's end-markets to beef up cyber defences. In 2021 Corero meaningfully outgrew DDoS peers such as Radware, Arbor/Netscout, and Genie as well as its TAM and in 2022 we expect similar trends with our estimates implying sales growth will accelerate to more than 30% year-on-year," said the analysts.

"Management continues to execute on its strategic objectives with the now attained 'self-sufficiency' an important milestone. Small-cap investors wanting exposure to a fast-growing cybersecurity play can buy at an attractive 2.1x EV/Sales, a ~65% discount to listed peers."