Proofpoint Continues To Execute At A High Level

Bill Choi of Wunderlich maintains a Buy rating and $93 price target on Proofpoint Inc PFPT's stock after the company reported a better-than-expected first quarter report.

Q1 In Review

Proofpoint's reported revenue of $113.3 million came in ahead of consensus estimates by $110.6 million and also grew by 43 percent a year ago. Earnings per share of $0.12 were above the 9 cents per share the consensus estimate was looking for while free cash flow of $28.2 million came in ahead of the analyst's $6.7 million estimate.

Billings for the quarter were $137.4 million rose 40 percent from a year go and also exceeded the consensus estimate of $134.5 million. Choi noted that while billings came in 2 percent higher it marks a deceleration from 4 percent in the prior quarter. However, the analyst believes that Proofpoint's deal pipeline remains "notably strong" heading into difficult comps in the coming quarters.

In fact, while Proofpoint's core email protection services comprise over half of new and add-on business, emerging products represented 10 percent of new and add-on business and bookings grew by more than 100 percent year-over-year. AS such, the company continues to thrive from competitive win rates and renewal rates of more than 90 percent which resulted in a 34 percent penetration of Fortune 1000 companies.

2017 Outlook

Choi noted that Proofpoint's updated second-quarter and full-year guidance prompted him to update his own estimates. The analyst increased his full-year 2017 revenue estimate from $491.2 million to $498.0 million while his earnings per share estimate were also boosted from $0.52 to $0.57.

The analyst's new estimate implies a 32.6 percent year-over-year growth, which is above an already targeted 28 to 30 percent long-term growth rate. But the analyst's 2018 revenue estimate of $637.4 million reflects a slowdown to 28 percent growth — a figure that is still in-line with the long-term targets.

Bottom line, Choi believes that an acceleration of market share gains and product and service diversification will warrant a higher multiple for Proofpoint's stock and also justify a "material" premium to the group.

At last check, shares of Proofpoint were up 9.65 percent at $77.85.

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