CORE Ecosystem And Global Expansion Will Open New Markets

Key Takeaways

• Expansion of product offerings and strategic partnerships aim to boost revenue and market share through enhanced market access and bundled sales.
  
• Strong financial position allows strategic investment in global expansion and product development, supporting revenue growth and improved margins.
  
• Heavy reliance on DDoS revenue and challenges in market expansion, product acceptance, and partnerships may impact margins and revenue growth.

Catalysts

Provides distributed denial of service (DDoS) protection solutions worldwide.

• Corero Network Security is expanding its product offerings with the introduction of the CORE ecosystem and additional capabilities such as traffic observability and Zero Trust Access Control. This expansion is expected to drive revenue growth by providing bundled sales and accessing adjacent market opportunities.
  
• The company is leveraging the resurgence in data center build-outs, driven by AI demand, to boost its customer base and sales. As DDoS protection becomes a requisite part of data center infrastructure, Corero can capitalize on this trend to increase revenue.
  
• Corero plans to expand its global footprint by doubling its direct sales team and increasing investments in sales and marketing, particularly in new territories like Latin America and the Middle East. This strategic focus is anticipated to drive revenue growth by capturing more market share.
  
• Building strategic partnerships with major industry players such as Akamai, Juniper, and GTT is expected to enhance market access and competitiveness, potentially leading to increased sales and improved market penetration, thereby positively impacting revenue and earnings.
  
• With a strong cash position and debt-free balance sheet, Corero has the financial flexibility to invest in product development and market expansion, supporting both top-line revenue growth and improvements in net margins and earnings through cost-effective operations.

Corero Network Security Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Corero Network Security's revenue will grow by 13.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.0% today to 6.9% in 3 years time.
• Analysts expect earnings to reach $2.5 million (and earnings per share of $0.01) by about April 2028, up from $498.0 thousand today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 73.0x on those 2028 earnings, down from 193.8x today. This future PE is greater than the current PE for the GB Software industry at 26.3x.
• Analysts expect the number of shares outstanding to grow by 1.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.97%, as per the Simply Wall St company report.

Corero Network Security Future Earnings Per Share Growth

Risks

• There is significant reliance on DDoS protection revenue, which could be a risk if market dynamics shift or competitive pressures increase, potentially impacting future revenues and earnings.
  
• Heavy investment in R&D and expansion of product lines, such as CORE, involves execution risk if these new products do not achieve the projected market acceptance, affecting future margins and profitability.
  
• Rapid planned expansion into new markets, such as Latin America and the Middle East, may involve operational and logistical challenges and heightened competition, possibly impacting net margins if the expansion is not effectively managed.
  
• The company's strategy heavily depends on partnerships and alliances, which could affect revenue stability and growth if any partnerships underperform or dissolve.
  
• Significant investments in sales and marketing for brand recognition indicate current brand weakness or limited awareness, which, if not successfully improved, may suppress revenue growth potential and ROI.

Valuation

• The analysts have a consensus price target of £0.212 for Corero Network Security based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £0.24, and the most bearish reporting a price target of just £0.18.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $36.0 million, earnings will come to $2.5 million, and it would be trading on a PE ratio of 73.0x, assuming you use a discount rate of 8.0%.
  
• Given the current share price of £0.15, the analyst price target of £0.21 is 30.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.