A Preview Of Barracuda Networks' Q4 Earnings

With Barracuda Networks Inc (NYSE: CUDA) scheduled to report its fiscal 2017's fourth-quarter results after the close on April 17, Imperial Capital’s Michael Kim expects to see continued robust growth in cloud email security and public cloud solutions, partly offset by a shift from on-premise deployments.

The analyst maintains an Underperform rating on the company, with a price target of $21.

Mostly In-Line Quarter

Kim estimates that Barracuda Networks’ revenue for the quarter would come in at $89.3 million, with adjusted EPS of $0.15, mostly in line with the consensus expectations of revenue of $88.4 million and EPS of $0.15.

The analyst believes management provided achievable guidance for the quarter and stated that Barracuda Networks has “consistently exceeded the high end of the guidance range for revenue, billings, and adjusted EPS through the year-to-date period.”

Following discussions with channel participants, Kim also expects the company to have witnessed robust growth in cloud email security, driven by Barracuda Essentials for Office 365.

The analyst believes Barracuda Networks continues to hold a solid competitive position in the small- and medium-business market.

In addition, Kim stated that the channel feedback on Barracuda Backup had been positive, driven by rising concerns about ransomware.

“Depending on the timing of planned growth investments, we look for potential upside to our adjusted EPS estimates, consistent with recent quarters,” the analyst went on to say.

Headwinds

On the other hand, Kim also expressed concern regarding rising competition in the network and application security space from established network security vendors going forward, while the ongoing customer migrations to public cloud infrastructure, especially cloud email, could lead to persisting headwinds for the company’s legacy on-premise business.

“Given sustained declines of hardware appliance sales, we see likely erosion of subscription revenue related to the legacy onpremise business, which we estimate will constitute 42 percent of subscription ARR exiting F4Q17, excluding the non-core business,” the analyst added.

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