Imperial Capital Incrementally Bullish On Verint After M&A Talk

Verint Systems Inc. VRNT, a New York-based analytics company, is reportedly in discussions to buy NSO Group, an Israeli cybersurveillance firm, for around $1 billion — a move that would reinforce the bullish case for owning the stock, according to Imperial Capital.

The Analyst

Imperial Capital's Jeff Kessler maintains an Outperform rating on Verint's stock with a price target lifted from $47 to $49.50.

The Thesis

Verint made its strength in using analytics for surveillance known to investors for many years, but the Wall Street Journal's report of the company's interest in acquiring NSO Group would mark a change in sales strategy and reignite momentum in the global cybersecurity space, Kessler said in a Thursday note.

The deal would come at a time when the market for Verint's products and solutions is more "sophisticated" and requires a new approach toward offering more flexibility in customer engagement, such as multiple enterprise functions both in and out of the cloud, the analyst said. 

Verint's positioning across the enterprise space bodes well for the company, as the overall cybersecurity sector is "rapidly building" a base of $5-million and $100-million contracts, Kessler said. This should help Verint "even out the peaks and troughs among the lumpiness" seen over the past few years regardless of whether the company is successful in closing an acquisition of NSO Group.

Bottom line, Verint is now setting the stage for stronger performance, and a new $49.50 price target is based on a 12.4x multiple on fiscal 2019E EV/EBITDA, which is half a turn above the analyst's historic forward multiple of around 12x.

Price Action

Shares of Verint Systems were trading flat up 0.83 percent at the time of publication Thursday. 

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Posted In: Analyst ColorNewsM&AAnalyst RatingsMediaCybersecurityimperial capitalisraelJeff KesslerNSO GroupWall Street Journal
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