Newly listed cloud security company Nubeva Technologies (TSXV:NBVA) has a scalable model that should be able to penetrate the increasingly lucrative cybersecurity market, says analyst Ralph Garcea of Echelon Wealth Partners, who on Thursday initiated coverage on Nubeva with a “Speculative Buy” rating and C$4.00 target price (all figures in US dollars unless noted otherwise).
March 7 was the opening day of trading for Nubeva, with the company announced a few weeks later that it had secured an agreement with US-based nonprofit the Security Advisor Alliance to help build and operate its secure communications and membership management systems in the cloud.
“We are honoured to have the opportunity to serve the Security Advisor Alliance because it is a significant and growing centre of leadership and vision for the cybersecurity industry,” said Nubeva’s Chief Marketing Officer Steve Perkins in a press release. “We look forward to ongoing discussions to demonstrate how Nubeva’s solutions address cybersecurity concerns of SAA members as they move to the public cloud.”
Garcea points to a growing global cloud IT market where revenue is predicted to increase from $180 billion in 2015 to $390 billion by 2020 at a Compound Annual Growth Rate (CAGR) of 17 per cent, while the cybersecurity market is expected to grow from $138 billion in 2017 to $232 billion by 2022 at a CAGR of 11 per cent.
“We believe NBVA’s model is scalable and with the partners and lighthouse customers it has already been able to penetrate, the Silicon Valley reference of ‘triple, triple, double, double, double’ from a revenue growth perspective is very achievable for Nubeva,” says the analyst.
“As industry applications, workloads, and network traffic migrate to the cloud, cloud-enabled visibility and security technologies are increasingly necessary to monitor and secure critical operations,” he says. “Nubeva’s StratusEdge cloud software migrates and extends organizations’ datacentre controls into the cloud, preserving vital investments in capability, policy, and teams.”
Garcea lays out four investment risks attached to NBVA: (1) the need for skilled talent in software development; (2) the need for appropriate steps to protect its intellectual property; (3) the threat of cyberattacks on its information technology; and (4) the threat of competition from other companies with greater resources and advantageous competitive positions.
Based on his estimates, the analyst sees Nubeva currently trading at F2020 (April 30, 2020) EV/Sales of 2.7 versus its global IT Security/SaaS comparables at C2019 4.1x and 6.3x, respectively.
His C$4.00 target price represents a potential return on investment of 163 per cent as of publication date.