Allot (ALLT): Assessing Valuation After Renewed Analyst Optimism and Earnings Upgrades

Renewed analyst optimism around Allot (ALLT), highlighted by its Zacks Rank of #1 Strong Buy and a sharply upgraded earnings outlook over the past 3 months, has pushed the stock sharply ahead of its tech peers.

See our latest analysis for Allot.

The optimism seems to be feeding directly into the tape, with Allot’s share price at $9.86 after a robust year to date share price return of around 59 percent and a standout 1 year total shareholder return of roughly 87 percent. This suggests momentum is still very much building rather than fading.

If Allot’s run has you rethinking your tech exposure, this could be a good moment to explore other high growth opportunities in high growth tech and AI stocks.

With shares still trading at a roughly 21 percent discount to estimated intrinsic value and more than 35 percent below the average analyst target, is Allot a genuine bargain, or is the market already pricing in much of its future growth?

Most Popular Narrative: 26.3% Undervalued

With Allot last closing at $9.86 versus a most popular narrative fair value of $13.38, the valuation story hinges on aggressive profit and growth assumptions.

Shift to a higher margin, recurring revenue product mix (SECaaS and software expansion deals now comprising a larger share of revenue) is directly driving gross margin improvement (now in the 71 to 73% range), with the expectation this will persist as more software based contracts are landed and legacy hardware and services shrink in mix. Persistent global data traffic growth, spurred by increasing connectivity, 5G/IoT adoption, and cloud migration, is fueling service provider investment in advanced traffic management and security analytics, directly benefiting Allot's differentiated, inline network visibility and control solutions; this supports a strong pipeline of future large deals and underpins expectations for multi year revenue and operating profit growth.

Read the complete narrative.

Curious how a maturing security business can still command a premium style valuation? The narrative leans on compounding revenue, fatter margins, and a rich future multiple. Want to see which forward looking profit and growth paths justify that gap to fair value, and how they stack up against today’s earnings base? Dive in and unpack the full playbook behind this price target.

Result: Fair Value of $13.38 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this upbeat view could falter if key telecom partners slow rollouts or if long sales cycles delay converting major pipeline deals into recurring revenue.

Find out about the key risks to this Allot narrative.

Another Angle on Valuation

While the narrative points to upside, our ratio based view is more cautious. Allot trades on a price to sales of 4.8x, well above its 2.8x fair ratio and peer average of 2.3x, even if roughly in line with the US software sector at 4.9x. That premium hints at less margin for error if growth stumbles, so are investors really being paid for the risk they are taking?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Allot Narrative

If you would rather challenge these conclusions or lean on your own research, you can build a custom Allot storyline in minutes: Do it your way.

A great starting point for your Allot research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Before the next move in Allot’s story, you might consider putting your capital to work across other opportunities on Simply Wall St’s Screener so you can stay on top of compelling setups.

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• Look for potentially attractive entry points with these 908 undervalued stocks based on cash flows that our models flag as trading below their cash flow based fair value.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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