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Morgan Stanley’s checks indicate better-than-feared demand in the first quarter for the cybersecurity sector against what they describe as “mostly beatable estimates.”
Analysts said in a note that Fortinet (NASDAQ:FTNT) screened best, with Q1 checks reflecting strong demand across the U.S. and Europe, but its expectations are higher. The analysts raised the firm’s price target on Overweight-rated FTNT to $77 from $70 per share. Meanwhile, Check Point Software Technology (NASDAQ:CHKP) reseller checks downticked, but its estimates seem okay, said the analysts.
Tactically, Morgan Stanley sees the most favorable first-quarter setups in Varonis Systems (NASDAQ:VRNS), CyberArk Software (NASDAQ:CYBR), Rapid7, Inc. (NASDAQ:RPD), and less so in Qualys (NASDAQ:QLYS).
“Safe Haven Trade Seems Back For Now,” wrote the analysts. “Q1 checks suggest largely healthy demand versus mostly conservative estimates. The environment is clearly much tougher than a year ago, but hasn’t gotten incrementally worse since last quarter and is mostly stable, unlike other areas of software.
“Q1 is typically the seasonally slowest quarter of the year for security and enterprise software, in general. Therefore, we wouldn’t expect far more upside to FY23 outlook beyond the magnitude of Q1 beats.”
