Summit Starts Imperva At Buy, Sees 'Secular Shift' Coming

In a report published Monday, WR Hambrecht analyst Srini Nandury initiated coverage of

with a Buy rating and price target of $75. The analyst noted that there appears to be a "secular shift" towards internal security measures. While the company's execution continues to see improvements under the new management, the analyst believes that Imperva's growth rates would also continue to improve as more and more enterprises begin to focus on enhancing the security of their internal assets, given that internal assets have been the target of some of the biggest breaches in recent times. The analyst expects the company to see revenue acceleration from the low-20s to the mid to high 20s, driven largely by, "1) The market moving in Imperva's favor, 2) Productivity improvements of its existing sales force, 3) Growth of subscriptions, 4) Upsell/cross sell more products to its existing customers, and, lastly, 5) New customer additions." These factors also make Imperva an attractive acquisition target, along with the company being among the best "pure play web and application firewalls" in the market today. "We believe any acquirer will need to pay a premium from the current levels, given the scarcity of similar standalone assets in the market," Nandury stated. The analyst expects the company to see an increase in demand trends for its products in the near term, with increased security spending driving demand. In addition, the company has significant room for growth, given that the market is largely underpenetrated. Imperva currently has 3,900 customers worldwide, with only 9 percent of the Fortune 1000 enterprises as its customers. According to the WR Hambrecht report, "Clearly, the company has a large and enviable runway for growth. It is as if the demand will only peak in the medium term, going forward. We believe large and well-known companies are at a higher risk than small and lesser known ones, given that hackers prefer to target well-known names… we believe many large companies with bigger budgets and bigger reputations to protect will deploy web and standalone application firewalls in the near-term." In addition, the analyst expects the company's deal sizes to grow going forward, driven by existing customers making repeat purchases.