On Friday, Baird, a financial services firm, adjusted its stock price target for Qualys (NASDAQ:QLYS), a cybersecurity company, increasing it to $150 from $145 while maintaining a Neutral rating on the stock. The adjustment comes amid challenges faced by the company, including pressure on its core vulnerability management (VM) business and an intensifying competitive environment.
Qualys has been noted as one of the most significant underperformers year-to-date, with its stock price declining approximately 28%, in contrast to the IGV (an index tracking tech companies) which has seen a rise of around 25%. Despite these challenges, Baird's analysis points to expectations for Qualys' revenue growth to be in the mid-to-high teens percentage range in 2025.
The company's financial health is highlighted by its substantial operating margins of over 40% and free cash flow (FCF) margins in the mid-thirties percent range. These metrics suggest that Qualys adheres well to the Rule-of-40, a financial principle that suggests a company's combined growth rate and profit margin should exceed 40% for sustainable growth.
Baird's analyst provided a comment on the company's outlook, stating, "We believe that QLYS will continue to face pressure as core VM is increasingly becoming table-stakes." This indicates that while Qualys maintains strong financial fundamentals, the standardization of vulnerability management within the cybersecurity industry could continue to challenge the company's performance.
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