Could CommVault Systems Be the Next Big Cloud Security Winner?

Commvault Systems, Inc. (CVLT) is the gold standard in cyber resilience, safeguarding data for over 100,000 organizations and ensuring their businesses remain resilient and thrive. It provides innovative security and AI features to protect data from cyber threats, modern backup and recovery capabilities, and integration with top cloud providers and security partners.

CVLT reported better-than-expected first-quarter 2024 results. Commvault’s total revenue came in at $224.70 million, surpassing analysts’ estimate of $215.54 million. Moreover, CVLT recorded a 17% annualized recurring revenue (ARR) year-over-year growth to $803 million, and its subscription ARR rose to $636 million, up 28% year-over-year.

In addition, the company posted non-GAAP net income per share of $0.85, compared to the consensus estimate of $0.73.

Furthermore, Commvault provided updated guidance for the fiscal year 2025. The company expects its total revenues to be between $915 million and $925 million. Its total ARR is expected to increase 15% year-over-year. Its subscription revenue is anticipated to be between $522 million and $527 million, and subscription ARR will grow 23%-25% year-over-year.

For the 13th consecutive time, CVLT was positioned by Gartner as a Leader in the 2024 Magic Quadrant for Enterprise Backup and Recovery Software Solutions based on its completeness of vision and ability to execute. Also, Commvault had been named a "Leader" and "Forward Mover" in the 2024 GigaOm Sonar Report for Cloud-Native Data Protection.

Shares of CVLT have gained 57.9% over the past six months and 119.9% over the past year to close the last trading session at $150.41. Also, the stock has surged 20.2% over the past month.

Let's look at factors that could influence CVLT’s performance in the upcoming months.

Positive Recent Developments

On August 5, CVLT announced an expansion of its cyber and data security ecosystem through strategic integrations with several security partners, including Acante, Dasera, Google Cloud, Splunk, and Wiz.

These integrations are crucial in enhancing cyber resilience for joint customers across on-premises, hybrid, and cloud environments, from detecting potential threats or anomalies to identifying the location of sensitive data and speeding up clean recoveries.

On July 31, CVLT announced Microsoft 365 Backup Storage as an integrated component of Commvault® Cloud Backup and Recovery for Microsoft 365. The Commvault Cloud platform, powered by Microsoft Azure, enables joint customers to deploy this integrated solution for enhanced cyber resilience while enabling single-pane-of-glass control that simplifies administration and delivers a low total cost of ownership (TCO).

Robust Financials

For the second quarter that ended June 30, 2024, CVLT’s revenues increased 13.4% year-over-year to $224.67 million. Its gross margin rose 13.7% from the year-ago value to $184.88 million. Its non-GAAP income from operations grew 11% from the prior year’s quarter to $48.30 million.

Additionally, the company’s non-GAAP net income and earnings per share were $38.40 million and $0.85, compared to $32.53 million and $0.72 in the previous year’s period, respectively. Its non-GAAP free cash flow was $43.83 million, up 15.7% year-over-year.

Favorable Analyst Estimates

Analysts expect CVLT’s revenue for the second quarter (ending September 2024) to grow 9.9% year-over-year to $220.97 million. The consensus EPS estimate of $0.76 for the ongoing quarter indicates an improvement of 8.2% year-over-year. Further, the company has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

For the fiscal year ending March 2025, Street expects Commvault’s revenue and EPS to increase 9.8% and 12.3% from the previous year to $921.31 million and $3.35, respectively. The company’s revenue and EPS for the fiscal year 2026 are expected to grow 10% and 15.1% year-over-year to $1.01 billion and $3.85, respectively.

High Profitability

CVLT’s trailing-12-month gross profit margin of 82% is 66.1% higher than the industry average of 49.36%. Likewise, the stock’s trailing-12-month EBIT margin of 9.86% is 95.5% higher than the industry average of 5.05%. Moreover, its trailing-12-month net income margin of 20.19% is significantly higher than the industry average of 3.63%.

Further, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 77.04%, 22.33%, and 18.70% favorably compared to the industry averages of 4.41%, 2.76%, and 2.06%, respectively. Its trailing-12-month levered FCF margin of 24.55% is 132.8% higher than the industry average of 10.54%.

POWR Ratings Reflect Promise

CVLT’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CVLT has an A grade for Quality, consistent with its higher-than-industry profitability. In addition, the stock has a B grade for Growth and Sentiment, in sync with outstanding financial performance in the last reported quarter and optimistic analyst estimates.

Within the Software - Application industry, CVLT is ranked #14 out of 129 stocks.

Beyond what I have stated above, we have also given CVLT grades for Value, Momentum, and Stability. Get all CVLT ratings here.

Bottom Line

CVLT has consistently demonstrated its leadership in the cloud resilience and data protection space, bolstered by robust financial performance and strategic integrations with leading cloud and cybersecurity partners.

What truly sets Commvault apart from its industry peers is its ability to protect a wide range of workloads, deliver enterprise-grade data protection, offer simple and scalable recovery, and uniquely advance cyber resiliency—all within a single, unified platform.

Given outstanding financials, accelerating profitability, and a promising long-term outlook, CVLT could be an ideal buy for solid returns.

How Does Commvault Systems, Inc. (CVLT) Stack Up Against Its Peers?

While CVLT has an overall POWR Rating of B, investors could also check out these other stocks within the Software - Application industry with an A (Strong Buy) rating: SS&C Technologies Holdings Inc. (SSNC), MarketWise Inc. (MKTW), and Magic Software Enterprises Ltd. (MGIC).

To explore more A or B-rated software stocks, click here.

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CVLT shares were unchanged in premarket trading Thursday. Year-to-date, CVLT has gained 88.37%, versus a 18.21% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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