Shield Cloud And PortNexus Partnership Will Expand Industry Footprint

Key Takeaways

• Introduction of Shield Cloud to AWS and a new PortNexus partnership could drive high revenue growth and expanded market reach.
  
• Elimination of debt and strong balance sheet enable strategic investments in R&D and expansion without needing more capital.
  
• Heavy reliance on government contracts presents concentration risk, with potential profitability challenges and investor uncertainty from revenue dependency and increased operating expenses.

Catalysts

Operates as a cybersecurity company in the United States.

• Introduction of the Shield Cloud product to the AWS marketplace is expected to serve as a high-growth engine, potentially impacting revenue positively in the second half of fiscal year 2025.
  
• New partnership with PortNexus and integration with their solutions may offer expanded market reach, enhancing Shield product revenue through increased customer deployments.
  
• Strategic investments in R&D, particularly targeting cybersecurity solutions for critical infrastructure, could open up new revenue opportunities in a promising market segment.
  
• Enhanced digital marketing strategies and revamped channel programs are anticipated to improve market visibility and customer engagement, potentially driving higher revenue growth.
  
• Strengthened balance sheet and elimination of outstanding debt position the company to invest in expansion and growth opportunities without the immediate need for additional capital, enhancing earnings potential.

Intrusion Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Intrusion's revenue will grow by 30.3% annually over the next 3 years.
• Analysts are not forecasting that Intrusion will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Intrusion's profit margin will increase from -135.0% to the average US Software industry of 12.0% in 3 years.
• If Intrusion's profit margin were to converge on the industry average, you could expect earnings to reach $1.5 million (and earnings per share of $0.07) by about May 2028, up from $-7.8 million 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 103.5x on those 2028 earnings, up from -3.1x today. This future PE is greater than the current PE for the US Software industry at 31.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.92%, as per the Simply Wall St company report.

Intrusion Future Earnings Per Share Growth

Risks

• Delays in government budget approval could impact consulting revenues due to potential disruptions in contract renewals and task orders, affecting overall revenue reliability.
  
• The company's revenue heavily depends on government contracts, with 92% of revenues from U.S. government entities, which poses a concentration risk that might negatively impact earnings if government policies or priorities shift.
  
• Operating expenses have increased slightly, with future plans to increase sales and marketing investments, potentially pressuring net margins if revenue growth does not offset these expenses.
  
• Despite positive revenue growth trends, the company reported a net loss for the quarter, reflecting ongoing challenges in achieving profitability, which could impact investor confidence and share price.
  
• Competitive challenges in pricing and marketplace positioning highlight execution risks in supporting new channels like AWS, which, if not managed well, might limit revenue growth from these initiatives.

Valuation

• The analysts have a consensus price target of $5.5 for Intrusion 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 $10.0, and the most bearish reporting a price target of just $1.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.8 million, earnings will come to $1.5 million, and it would be trading on a PE ratio of 103.5x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of $1.25, the analyst price target of $5.5 is 77.3% 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.