3 Reasons To Buy Proofpoint, According To DA Davidson

Need a reason to buy shares of Proofpoint Inc PFPT despite a 45 percent gain over the past year? Analysts at DA Davidson are offering three.

DA Davidson's Jack Andrews upgraded Proofpoint from Neutral to Buy with a price target boosted from $83 to $90. The analyst initiated coverage of the security-as-a-service provider on October 3, 2016, with a Neutral rating but since the stock has gained just 2.9 percent versus a 10.4 percent gain in the Nasdaq index.

Andrews believes the stock's underperformance since October presents an attractive entry point for investors. The analyst also offered three main reasons to support his upgrade:

• 1. The analyst's discussions with more than 25 chief security officers consistently argue that email and social engineering threats are the biggest security challenges and Proofpoint's products are considered to be an "imperative strategic purchase."
• 2. Proofpoint's ramping free cash flow growth could provide "tangible valuation support" moving forward. The company is also good at analyzing the various trade-offs between growth and profitability as its EVF/FCF/growth metric is just 0.7x.
• 3. Proofpoint is scheduled to report its first quarter results after Thursday's market close. The analyst is projecting revenue to grow 41.4 percent from the same quarter a year ago to $111.7 million, which is above the Street's estimate of $110.6 million and even higher than the company's own guidance of $109 to $111 million.

Bottom line, Proofpoint is an industry leader that is tackling an "increasingly large and strategic market opportunity."

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