DA Davidson bearish on Tenable stock amid revenue slowdown

On Thursday, Tenable Holdings Inc . (NASDAQ:), a cybersecurity company, experienced a downgrade in stock rating from ‘Buy’ to ‘Neutral’ by DA Davidson. Accompanying this change, the firm also reduced the price target for Tenable to $40.00 from the previous $56.00. The adjustment follows Tenable’s second-quarter results, which DA Davidson described as “mixed at best.”

The company’s Core Cyber Business (CCB) reported revenues approximately $4.5 million below consensus and exhibited a slowdown in year-over-year growth, dropping to 10% from 12% in the previous quarter.

The analyst pointed to increased deal scrutiny and lower conversion rates within the core Vulnerability Management (VM) business, especially in the enterprise segment of North America, as the primary reasons for the performance dip.

Despite the competitive dynamics in the VM sector becoming increasingly favorable, Tenable has not been able to fully leverage this advantage. While the company’s non-VM products have continued to gain strong traction, they have not been sufficient to completely counterbalance the core business’s slower growth.

Reflecting on the overall company guidance for the calendar year 2024, DA Davidson noted that Tenable has revised its expectations downwards for both revenue and CCB.

The updated CCB guidance forecasts a growth of just 9-10% year-over-year, a decrease from the previously anticipated 13-14% year-over-year growth. With the anticipated deceleration of growth into the high single digits in the near term, the firm has chosen to adjust its rating and price target for Tenable accordingly.

In other recent news, cybersecurity firm Tenable Holdings Inc. has seen a series of developments in its financial performance and market position. Following a strong first quarter in 2024, with a 14% year-over-year revenue increase to $216 million, Tenable experienced a downgrade in stock rating from ‘Buy’ to ‘Neutral’ by DA Davidson. This adjustment was made after the company’s second-quarter results, which were described as “mixed at best” by the analysts.

Tenable’s Core Cyber Business (CCB) reportedly fell approximately $4.5 million below consensus, with a slowdown in year-over-year growth. Despite this, Tenable’s new product, Tenable One, achieved a record high, constituting 26% of new enterprise sales. The company’s Exposure Solutions also continued to represent about half of the new enterprise sales.

In terms of future expectations, Tenable anticipates growth acceleration in the second half of the year, driven by product integration and pipeline opportunities. However, DA Davidson noted that the company has revised its expectations downwards for both revenue and CCB for the calendar year 2024. As these recent developments unfold, investors and market watchers continue to monitor Tenable’s performance and strategies.

InvestingPro Insights

Following the recent downgrade by DA Davidson, Tenable Holdings Inc. (NASDAQ:TENB) presents a mix of challenges and opportunities according to the latest data and insights from InvestingPro. With a market capitalization of $5.46 billion, Tenable is trading at a high Price / Book multiple of 15.21, reflecting a premium valuation in the cybersecurity sector. Despite being unprofitable over the last twelve months, the company’s impressive gross profit margin stands at 77.36%, showcasing its ability to maintain a strong profit on its core services.

InvestingPro Tips highlight that Tenable’s net income is expected to grow this year, with analysts predicting the company will become profitable. This is particularly noteworthy as it contrasts with the 16 analysts who have revised their earnings downwards for the upcoming period. While the company operates with a moderate level of debt, it does not pay dividends to shareholders, which may influence investment decisions for those seeking income-generating stocks.

For investors seeking more in-depth analysis, there are additional InvestingPro Tips available on the platform that could provide further guidance on Tenable’s financial health and future prospects.

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