Commvault Sustains Post-Earnings Momentum | MarketBeat

Data Backup and Recovery Specialist Commvault Systems Inc. NASDAQ: CVLT is soaring after the company beat earnings and sales forecasts in the most recent quarter.

Post-earnings momentum has been kept alive since Jan. 30, with Commvault shares up 22.49%, while the SPDR S&P MidCap 400 ETF Trust NYSEARCA: MDYof which Commvault is a component, returned 7%.

With a market capitalization of $4.39 billion, Commvault is too small to be included in the S&P 500 Index.

However, if you compare the performance of Commvault stock to other tech stocks in the Technology Select Sector SPDR fund NYSEARCA: XLKyou’ll see that Commvault has outperformed large-cap tech over the past three months.

Beating Wall Street Earnings, Revenue Views

Commvault Systems earnings data from MarketBeat shows net income of 78 cents per share, a cent above Wall Street’s consensus forecast. Revenue of $216.81 million far exceeded forecasts of $208.01 million.

This also exceeded the company’s revenue range of $206 million to $210 million.

Commvault grew earnings 26% in the quarter and revenue 11%.

On the Commvault Systems chart, you’ll see that the stock has extended following its big rally, trading 14% above its 50-day moving average and 2.5% above its 10-day line .

At this juncture, the stock appears to be a good candidate for a possible purchase when it returns to a short- or medium-term moving average. Buying into an extended rally is risky, as it is easy to get shaken by the next normal pullback.

Double-digit subscriptions and recurring revenue growth

A driver of the bullish investor response has been Commvault’s subscription revenue and annual recurring revenue.

Subscription revenue came in at $114.2 million, exceeding the company’s forecast range of $106 million to $110 million. This is a year-over-year increase of 31%. Annual recurring revenues were $752 million, up 17% year-over-year.

The growing need for data security is contributing to Commvault’s business growth.

“These results confirm that Commvault’s products and services are more in demand than ever, especially as companies grapple with how to keep their data secure, compliant and resilient in a world increasingly threatened by cyber attacks,” said the CEO Sanjay Mirchandani on earnings conference call.

“The most important pivot” in the history of the company

Instead of just focusing on prevention, he added, companies are now placing a strong emphasis on recovery and resilience.

“This transition has fueled the most important turning point in our 27-year history,” he said, adding that the company’s new cloud-based products enable data recovery “from anywhere to anywhere, quickly, reliably and at scale. The platform provides artificial intelligence capabilities, offering customers automated and predictive recovery, threat intelligence and operational efficiency to deliver true cyber resilience.”

Commvault forecast revenue for the current quarter in the range of $210 million to $214 million, beating analysts’ opinions.

Return of capital through share buybacks

Commvault doesn’t offer a dividend, as is common among fast-growing tech stocks, but the company returns capital to shareholders through buybacks. It bought back $51.3 million of shares in the fourth quarter.

Forecasts from MarketBeat’s Commvault analysts show a consensus view of “moderate buy,” with the current price target of $85.60 indicating a pullback may be in sight. That’s why it’s not a good idea to buy a stock immediately after it rises 10% or more.

Because Commvault is a mid-cap company, with only 43.2 million shares in the float, there isn’t the same analyst coverage found in larger technologies.

However, analysts at research outlet Refinitiv give the stock an Earnings Rating of 9 out of 10, which they call “significantly more bullish” than the overall Software industry rating of 6.9.

Average correlation of price movement with the broad market

When it comes to the behavior of Commvault stock relative to the broader market, Refinitiv said that on days when the market is up, Commvault tends to lag the S&P 500 Index. “On days when the market is down , the stock generally performs in line with the index.”

Commvault has a beta of 0.90, which indicates that the stock is theoretically 10% less volatile than the overall market, making it moderately less risky.

Refinitiv noted a medium correlation with the broader market, but pointed out that over the past 90 days, a time period that includes the post-earnings run, Commvault shares have been more volatile than the broader market, “as the price daily fluctuations of the stock have exceeded those of 63% of the companies in the S&P 500 index”.

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