TSP Weekly Tech Stock Update—Sep 14, 2024

This Week: NOW new record high, AVGO shares rebound, GOOGL bounces, Unity jumps on price hike, Apple debuts iPhone 16, Guggenheim bullish on Elastic, ZS potential good news, cybersecurity M&A & more.

Hello from Rob…

—At the Citi tech conference at the start of September, Palo Alto Networks (PANW, $346.90) CEO Nikesh Arora said he thought the M&A environment in cybersecurity is cooling off, noting “there’s still a dislocation in price versus value in the expectations for startups.”

At the same time, he believes the consolidation market “will be the next market in play.” Arora said companies in the $1 billion to $10 billion range “are going to be looked at by a lot of players.” He also thinks it’s where “a lot of mistakes will be made” in terms of companies cobbling together a bunch of smaller vendors to try to compete more effectively with the big cybersecurity platforms.

In late July, Tenable (TENB, $39.74) shares jumped as much as 14% in one session, hitting a high of $49.18, after Bloomberg reported that the security solutions vendor was exploring its options, including a potential sale, after receiving takeover interest. The report stated Tenable was working with advisors and could attract interest from both private equity and strategic buyers.

With no major buyout chatter since then, Tenable shares have retreated into the upper $30s. It doesn’t help that the company offered a below-consensus Q3 revenue outlook due to heightened customer scrutiny around cybersecurity budgets.

In Q2, Tenable’s total revenue rose 13% to $221.1 million, above the consensus of $218.4 million. For Q3, the top-line outlook of $222 million to $224 million fell short of the consensus of $228.1 million.

Tenable has been doing some M&A of its own, recently acquiring Eureka Security, a provider of data security posture management (DSPM) for cloud environments. Last fall, Tenable paid $265 million for Ermetic, a provider of a cloud-native application protection platform (CNAPP) and cloud infrastructure entitlement management (CIEM) capabilities.

Tenable stock is down 13.7% YTD. The market cap stands at $4.73 billion. The 2024 consensus revenue estimate of $892.6 million represents growth of 11.8%.

*Inside This Issue: AI Advancements In Threat Detection

—Paid subscribers will receive the October 2024 PDF of Tech-Stock Prospector (TSP #272) via email on Tuesday, October 8.

—Paid subscribers have access to the TSP Market Overview and TSP Portfolio Updates sections inside this issue.