AI Analytics And Cloud Security Will Expand Market Opportunities

Key Takeaways

• Tenable's strategic focus on AI and platform integration is enhancing competitive advantage, driving customer adoption, and expanding market opportunities.
  
• Investments in cloud security and strategic acquisitions are improving revenue streams and operational efficiency, supporting earnings growth and shareholder value.
  
• Ongoing macroeconomic uncertainty and competitive pressures could impact Tenable's revenue growth and market share, particularly in the U.S. public sector and vulnerability management segment.

Catalysts

Provides cyber exposure management solutions in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan.

• The strategic expansion of Tenable One as a comprehensive exposure management platform and the integration of AI-driven analytics provide a competitive advantage that is expected to drive revenue growth through larger deal sizes and an increase in customer adoption.
  
• Investments in cloud security, as emphasized by strategic wins in the public and financial sectors, are anticipated to increase revenue and foster customer loyalty through superior multi-cloud management capabilities and platform consolidation.
  
• The Vulcan Cyber acquisition enhances Tenable’s capabilities by allowing for the ingestion of third-party data and improving remediation workflows, potentially improving net margins by streamlining operations and reducing the complexity of vendor management.
  
• The strategic focus on AI and the integration of vast exposure data are expected to create a competitive moat, reduce risk, and expand market opportunities, likely leading to higher earnings through enhanced service offerings and pricing power.
  
• Continued share repurchases and disciplined financial management, despite expected macroeconomic uncertainties, support EPS growth and shareholder value, indicating confidence in future free cash flow generation and profitability.

Tenable Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tenable Holdings's revenue will grow by 8.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -4.9% today to 4.4% in 3 years time.
• Analysts expect earnings to reach $51.6 million (and earnings per share of $0.59) by about May 2028, up from $-44.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $81.1 million in earnings, and the most bearish expecting $-11.8 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 119.8x on those 2028 earnings, up from -81.9x today. This future PE is greater than the current PE for the US Software industry at 31.7x.
• Analysts expect the number of shares outstanding to grow by 1.12% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.93%, as per the Simply Wall St company report.

Tenable Holdings Future Earnings Per Share Growth

Risks

• The ongoing macroeconomic uncertainty, particularly in the U.S. public sector, could impact visibility and lead times for procurement decisions, potentially affecting Tenable's future revenue and growth.
  
• Changes in the business environment, such as geopolitical events and policy actions, may disrupt the enterprise business, increase the length of sales cycles, and ultimately impact revenue recognition.
  
• A cautious approach and guidance revision due to leadership disruptions in U.S. civilian agencies could impact public sector contracts and revenue stability.
  
• Pressure from competitive dynamics in the vulnerability management (VM) space, specifically from endpoint players like Microsoft and CrowdStrike, could affect Tenable's market share and revenue growth in this key segment.
  
• Economic uncertainties and potential longer lead times for procurement in the federal sector, combined with potential shifts in budget allocations, may heighten risks associated with Tenable's net margins.

Valuation

• The analysts have a consensus price target of $39.65 for Tenable Holdings 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 $48.0, and the most bearish reporting a price target of just $28.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.2 billion, earnings will come to $51.6 million, and it would be trading on a PE ratio of 119.8x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of $30.57, the analyst price target of $39.65 is 22.9% 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.