On Wednesday, Piper Sandler maintained a Neutral rating on CommVault Systems (NASDAQ:CVLT) shares, with a steady price target of $140.00. The firm's analysis follows CommVault's announcement of its plan to acquire Clumio, a cloud data protection vendor. The transaction is expected to be finalized in early October 2024. CommVault also confirmed its second-quarter fiscal year 2025 earnings guidance alongside this announcement.
The acquisition of Clumio is set to enhance CommVault's cloud portfolio by adding AWS S3, EC2/EBS, and other cloud workload protection capabilities. This move is in line with CommVault's strategy of ensuring comprehensive data management across all workloads, and it is anticipated to speed up the delivery of AWS-focused solutions.
According to Piper Sandler, the deal is projected to contribute to CommVault's annual recurring revenue (ARR) growth immediately and to free cash flow (FCF) within the next three quarters.
The announcement comes shortly after Salesforce (NYSE:CRM) disclosed its own plans to acquire Own, marking another significant move in the cloud backup and recovery space. While CommVault's latest acquisition aligns with its previously stated capital usage policy, which emphasizes technological enhancements through acquisitions, it may prompt investors to consider whether this move is aimed at bolstering growth or if it indeed provides a unique technological advantage.
Piper Sandler's commentary suggests that the acquisition is a strategic step for CommVault, potentially accelerating its market presence in cloud solutions. The firm's reiteration of the Neutral rating and price target reflects a consistent view on CommVault's market position following the announcement of the Clumio acquisition.
In other recent news, Commvault has been making significant moves in the data protection sector. The company recently announced its acquisition of Clumio, a firm specializing in securing cloud data on Amazon (NASDAQ:AMZN) Web Services (AWS). The deal, expected to close in early October 2024, aims to enhance Commvault's cyber resilience and recovery offerings for AWS-based applications. This acquisition is anticipated to be immediately accretive to Commvault's Annual Recurring Revenue (ARR) and revenue.
Commvault also reported a robust first quarter for fiscal year 2025, with total revenue increasing by 13% to $225 million and ARR rising by 17% to $803 million. The company's free cash flow is expected to approach 25%, a figure that aligns with the Rule of 40, a metric used to assess a company's performance and growth potential.
In terms of analyst notes, DA Davidson raised the price target for Commvault Systems to $175 from $170, maintaining a Buy rating. Guggenheim also reiterated a Buy rating, highlighting the company's potential to increase its market share in the cloud and on-premise data protection markets.
In other developments, Commvault Systems confirmed the election of nine director nominees and the ratification of Ernst & Young LLP as the company’s independent public accountants for the fiscal year ending March 31, 2025. These recent developments highlight the company's strong execution and promising growth prospects.
InvestingPro Insights
In light of Piper Sandler's neutral stance on CommVault Systems (NASDAQ:CVLT), it's worth noting a few key metrics and InvestingPro Tips that could provide additional context for investors. With a market cap of $6.68 billion and a high P/E ratio of 38.2, CommVault is trading at a premium compared to some of its peers. This is further underscored by its adjusted P/E ratio for the last twelve months as of Q1 2025, which stands at 36.48, indicating a high valuation.
One of the InvestingPro Tips highlights that CommVault holds more cash than debt on its balance sheet, which is a positive sign of financial health and could provide the company with flexibility for future investments and acquisitions, such as the recent Clumio deal. The company's gross profit margins are impressive, at 82% for the last twelve months as of Q1 2025, which suggests that CommVault has been efficient in managing its cost of goods sold and maintaining profitability.
However, it is important for investors to consider that four analysts have revised their earnings downwards for the upcoming period, which could signal potential headwinds or a more conservative outlook on the company's financial performance. Moreover, CommVault's revenue growth for the last twelve months as of Q1 2025 was solid at 10.32%, with a quarterly increase of 13.38%, reflecting a positive trend in the company's top-line performance.
For those interested in a deeper analysis, there are additional InvestingPro Tips available for CommVault, which can be found at https://www.investing.com/pro/CVLT. These tips can provide further insights into the company's valuation multiples, profitability predictions, and stock performance trends, which may be particularly useful given the current market dynamics and the strategic acquisition of Clumio.
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