On Thursday, Rosenblatt Securities adjusted its outlook for OneSpan Inc. (NASDAQ: NASDAQ:OSPN), reducing the price target to $18.00 from the previous $20.00, while still affirming a Buy rating on the company's stock. The adjustment follows OneSpan's third-quarter financial performance, which surpassed market expectations in terms of revenue and earnings.
OneSpan's quarterly report revealed a slight 4% decrease in year-over-year revenue, which was attributed to expected declines in hardware sales.
However, the company showcased significant growth in its subscription services, which now represent 60% of total sales, marking a 29% increase compared to the same period last year. The adjusted EBITDA margins were reported at 29.7%, a substantial rise from the 10.7% recorded in the third quarter of 2023.
The company's management has revised its full-year 2024 revenue guidance, tightening the forecast range, but has kept its Annual Recurring Revenue (ARR) projections unchanged. Additionally, the adjusted EBITDA expectations have been raised due to better-than-anticipated operating leverage and cost savings. This financial discipline and focus on operational efficiency have been key to the company's performance.
Despite the revised revenue outlook, Rosenblatt's stance on OneSpan remains positive, citing the company's successful shift towards recurring revenue streams and improved profitability. The firm's decision to lower the price target reflects a cautious approach to the company's revenue projections but underscores the confidence in OneSpan's strategic direction and financial gains.
In other recent news, OneSpan Inc., a global leader in digital security and e-signature solutions, has introduced VISION FX, a new anti-phishing technology for banks, aiming to combat cybersecurity risks in the banking sector.
The company also reported a strong financial performance in its Q2 2024 earnings call, with a 9% increase in revenue and a 15% rise in Annual Recurring Revenue (ARR). Adjusted EBITDA reached $16 million, reflecting the company's robust growth. Furthermore, OneSpan's strategic shift towards a software-centric business model resulted in software and services now making up 75% of the company's total revenue.
Rosenblatt, a financial services firm, initiated coverage on OneSpan with a Buy rating, pointing out the company's significant improvement due to its shift from hardware to a software-centric business model. This strategic shift was identified as a key driver for OneSpan's enhanced subscription revenue growth and profitability.
Despite these advancements, Rosenblatt suggests that OneSpan's current valuation does not fully reflect the progress it has made in its business model transformation, presenting the stock as a potentially undervalued investment.
These recent developments reflect OneSpan's strategic shift towards software and a focus on cost savings and targeted investments. The company reaffirmed its full-year revenue guidance, projecting revenues between $238 million and $246 million and ARR between $166 million and $170 million. OneSpan closed the quarter with $64.3 million in cash and cash equivalents and no long-term debt, indicating a sound financial position.
InvestingPro Insights
OneSpan Inc.'s (NASDAQ: OSPN) financial performance aligns with several key metrics and insights from InvestingPro. The company's market capitalization stands at $551.4 million, reflecting its position in the cybersecurity sector. OneSpan's revenue for the last twelve months as of Q2 2024 was $247.53 million, with a notable revenue growth of 8.99% over the same period.
InvestingPro Tips highlight that OneSpan holds more cash than debt on its balance sheet, which supports the company's financial stability as it transitions towards a subscription-based model. This aligns with the article's mention of significant growth in subscription services, now representing 60% of total sales.
Another InvestingPro Tip indicates that net income is expected to grow this year, which is consistent with the company's raised adjusted EBITDA expectations mentioned in the article. The improved profitability is further evidenced by the impressive EBITDA growth of 367.41% in the last twelve months as of Q2 2024.
The company's P/E ratio (adjusted) of 20.51 and PEG ratio of 0.24 suggest that OneSpan may be undervalued relative to its earnings growth potential, which could be of interest to investors considering the company's strategic shift and improved financial performance.
For readers seeking a more comprehensive analysis, InvestingPro offers 10 additional tips for OneSpan, providing a deeper understanding of the company's financial health and market position.
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