Strong Q3 Results Nudge Barracuda Networks (CUDA) Slightly Higher

Barracuda Networks Inc (NYSE:CUDA) is trading 1.9 percent higher this morning, following the release of the company’s third-quarter financial results – which crushed Wall Street forecasts.

Nearly 1.5 million shares of the cybersecurity provider’s stock has changed hands so far today, more than double the stock’s average volume of about 668,000 shares per day.

The cloud-enabled network security company told shareholders after the market close yesterday that it earned an adjusted 22 cents per share during the three-month period – which ended on November 30. Wall Street analysts who were surveyed had collectively projected Barracuda’s adjusted earnings would be just 14 cents per share.

When it came to net sales, Barracuda also topped estimates. The company generated a total of $88.8 million in net revenues, while analysts were forecasting $86.6 million.

Compared to the same quarter the previous year, Barracuda’s net sales grew 11 percent higher – up from $80.1 million in Q3 2016. Gross billings during the third-quarter hit $100.4 million, up from $89.0 million in the year-ago period.

“Barracuda delivered a strong third quarter with core product billings outpacing our expectations, driven in part by increasing customer adoption of our cloud-based security and data protection solutions,” said BJ Jenkins, President and Chief Executive Officer of Barracuda Networks. “We continue to execute on our strategy to capitalize on market trends as more customers utilize our solutions as they move applications and workloads to the cloud.”

During the reported quarter, the company’s NextGen Firewall became available on Google’s Cloud Platform – the first of its kind on the platform. The firewall, which can also be found on Microsoft Azure and the Amazon Web Services Marketplace, allows users to securely access cloud apps in spread out networks.

Barracuda was also named the 2016 ChannelPro SMB All-Star during the third quarter for its innovation on a number of its products. Tech & Learning honored the company with its Award of Excellence for a handful of its solutions, and the company also became a finalist for CRN Products of the Year.

It was announced today that Morgan Stanley reiterated an “Equal Weight” rating on shares of Barracuda Networks – while lifting its 12-month price target on the stock from $22.00 to $25.00.

“Barracuda is benefiting from several drivers, including the increasing priority of security within SMBs, an evolving threat environment which necessitates a focus on data protection and cloud adoption driving new security spend and new delivery models,” commented Morgan Stanley analyst Melissa Gorham. “As such, Barracuda is seeing some success in more strategic areas of security– managed security, cloud-based security and next gen firewalls– while growing its customer base with active subscribers +15% year-over-year.”

Gorham added that the company’s transition away from appliances has simmered down, allowing its billings to grow 13 percent higher – compared to just six percent year-to-date. The analyst says Barracuda has “meaningful leverage” despite the continued model transition, as the company’s operating margins hit 19 percent. Morgan Stanley had projected 13 percent.

The author has no positions in the above mentioned companies.

Tim is a contributing analyst for and specializes in equities trading and public offerings. He is a graduate of UCLA and began his career doing capital markets research for a top investment banking software provider.