Watch These Security Software Stocks, Pacific Crest Says

In a report published Sunday, Pacific Crest Securities provided a preview on seven companies reporting across the infrastructure and security software space this week. The firm pointed out ServiceNow, Inc. NOW and VMware, Inc. VMW as the most favorable risk/reward profiles.

VMware

While the Street sentiment is negative, and shares are down more than 15 percent over the past six months, Pacific Crest remains bullish. The firm believes that “Q4 shape will up well for VMware as healthy enterprise demand is likely to show in results,” with its checks pointing to “continued traction in suites and end-user computing.”

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The firm estimates that “VMware will achieve an in-line to beat Q4 and give in-line 2015 guidance.”

Under the belief that most of the risk is already priced in the stock, the research firm issued an Outperform rating and a $115 price target.

The stock currently trades around $82.25.

Fortinet

Fortinet, Inc. FTNT also has an Outperform rating and a $29 price target, although the stock trades above $32 already. The firm expects a beat for Q4, and 2015 guidance in line with the Street’s estimates.

According to the report, Pacific Crest’s “checks indicate momentum continues to pick up within the enterprise channel and deals with large customers. The company also is benefiting from recent product refreshes and a healthy network security market, which we [the analysts] believe set up Fortinet to produce another very solid quarter.”

ServiceNow

ServiceNow also saw the research firm issue an Outperform, accompanied by a $75 price target -- up from the current $67.75 per share.

Analysts explained: “Core momentum remains strong as ServiceNow continues to displace legacy competition in the traditional ITIL application market and the IT operations portfolio continues to grow. We are also picking up increased traction around the platform play. We expect Q4 results to beat and 2015 estimates to increase.”

Citrix Systems

Citrix Systems, Inc. CTXS carries a Sector Perform rating from Pacific Crest, while the Street sentiment is negative.

"Our checks indicate Citrix continues to lose share to chief competitors VMware and F5 Networks. However, both the desktop and datacenter businesses should benefit from easier comparisons this quarter and expectations remain low," they add.

"Citrix is going through a restructuring, including sales strategy, which is good for margins, but could weigh on 1H results. We believe the company will achieve in-line results on modest Q4 expectations, and will give in-line guidance for 2015.”

Check Point Software Technologies

Same as Citrix, Pacific Crest rates Check Point Software Technologies Ltd. CHKP with a Sector Perform, even though the firm expects a beat in earnings and in-line guidance, as analysts “believe Check Point is maintaining, but not gaining share in a very healthy demand environment.”

Proofpoint

Another Outperform-rated stock is Proofpoint, Inc. PFPT. Pacific Crest set a $51 price target, as “underlying momentum remains strong as Proofpoint is displacing legacy competition and TAP is expanding ASPs.”

Analysts expect an earnings beat and a raise in guidance.

Solarwinds

Solarwinds, Inc. SWI, lastly, received a Sector Perform recommendation, as analysts expect a Q4 beat and in-line guidance.

The report stated: “Comparisons start to get tougher in Q4 given timing of prior acquisitions; however, estimates appear conservative. Overall, we remain cautious on the story as roughly every dollar of cash flow generated fuels growth via additional acquisitions.”