Mimecast: Why Deutsche Bank Rates This Cybersecurity Play A Buy

Cloud-based email management company Mimecast Ltd MIME is a somewhat unique play in the security software space, according to a Deutsche Bank analyst. 

The Analyst

Deutsche Bank analyst Gray Powell initiated coverage of Mimecast shares with a Buy rating and a $35 price target.

The Thesis

Mimecast "exhibits a high recurring/SaaS-based revenue model, operates within a segment that is gaining share of IT security budgets and benefits from the adoption of cloud email/Office 365," Powell said in a Monday note. (See the analyst's track record here.) 

Mimecast is positioned well against competitors in its core markets — email security, archiving, e-discovery and continued services — since the company focuses on email as a threat vector, the analyst said. Powell singled out Mimecast as "the only vendor selling full suite of cyber resiliency products with a small- to mid-market focus." 

Powell expects the company to grow revenues at a nearly 25-percent annual pace over the next three years and estimates revenues of $254 million for fiscal year 2018 and $319 million for 2019. The Street estimates are at $254 million and $308 million, respectively.

With Mimecast shares trading in line with security software peers on a EV/sales basis despite the company's superior growth prospects, the Deutsche Bank analyst said the stock has a favorable risk-reward. 

The Price Action

Mimecast shares are up about 63 percent year-to-date .

At the time of writing, shares of Mimecast were up 2.06 percent at $29.75.

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