Imperva (IMPV): Showing great potential

By Mike Cintolo, Chief Analyst, Cabot Growth Investor and Cabot Top Ten Trader
From Cabot Wealth Advisory 11/19/15 Sign up for Cabot Wealth Advisory—it’s free!

Smaller companies in cybersecurity are showing great potential. The fundamental backdrop is about as bullish as can be, with companies of all sizes realizing that network protection is now a necessity. But while some of the stocks of bigger players are looking damaged after long runs, I’m seeing a couple of niche players remain in great shape.

One is Imperva (IMPV). Here’s what I wrote about the company a couple of weeks ago in Cabot Top Ten Trader:

“Six months ago, every stock involved in cybersecurity was red hot, but now it’s become more selective—some stocks have been trashed (like FireEye), some are base-building (Palo Alto Networks) and some niche players, like Imperva, look great. Imperva is a smaller player (just $213 million in revenue) in the industry, but it’s made a name for itself by having some of the best products for Web and application-specific firewall products. Most companies have big-picture network firewalls, but demand is now exploding for application- and data-specific protections, which have seen increasing attacks from hackers—and that’s what Imperva specializes in! That’s one major positive, and another is management—CEO Anthony Bettencourt took over last August and has turned the firm’s top-notch products into hugely accelerating sales and earnings. (In fact, Imperva lost 203 contracts to IBM from 2010-2014, but it’s now gotten back 40 of those deals this year alone, including a few huge ones.) Imperva’s third-quarter report was a tremendous blowout, with sales and earnings miles ahead of estimates and strength seen in both products and subscriptions; analysts now think profits will total 31 cents per share next year (up from a prior estimate of a loss before the report), but we think that is likely to be very conservative. There’s a lot to like here.”

Since the stock gapped up on those terrific results, IMPV hasn’t done much. But I view that as a positive given what has happened in the market. Compared to huge, well-known, stagnant stocks, IMPV has a lot of potential for improved perception—about 330 mutual funds own shares, so there’s solid sponsorship, but that figure can double or triple if management delivers huge earnings beats in the quarters ahead.  

I think you could buy a small position in the stock here, but the key will be how you handle it. For that, I suggest giving Cabot Top Ten Trader a try—you’ll get specific buy and sell points, follow-up advice and, of course, recommendations in which investor perception is on the rise! Sign up for your no-risk trial today.