JPMorgan says this data security stock is a great pick for the second half with AI tailwinds
Varonis Systems is poised to make a comeback in the latter part of 2024 as data security demand picks up, according to JPMorgan. Analyst Brian Essex upgraded the stock to overweight from neutral and set a December 2025 price target of $54, up from $50. The new target suggests upside of roughly 29% from Thursday’s close. Shares have dropped 6.7% this year as data security stocks saw a broader decline, creating a compelling buying opportunity for investors heading into the second half of the year, the analyst wrote in a Friday note. VRNS YTD mountain Varonis year to date “We see an attractive setup for the stock into the back half of the year as expectations remain reasonable, demand for Data Security is accelerating, and we could see multiple tailwinds including renewal catalysts in 3Q and 4Q, improving fundamentals with transition execution, and traction from recently introduced [managed data detection and response software]. As we head into FY25, we could also see AI tailwinds emerge,” Essex said. According to Essex, data security demand is rising as ransomware attacks are expected to increase, with a breach likely to happen every two seconds in 2031. That would be up from 11 seconds in 2021, according to data he cited from Cybersecurity Ventures. Companies will therefore need to protect their data exposed to these attacks, especially as adoption of generative artificial intelligence grows, he said. “Although elevated levels of demand are driving growing levels of competition across the data security space, we view Varonis as one of the best positioned to capitalize on data security demand with a Best of Breed Data Security platform,” the analyst added. Varonis came out with a better-than-expected quarterly print in early May, posting a loss of 3 cents per share on $114 million in revenue, while analysts polled by FactSet called for a loss of 9 cents per share on $113.7 million in revenue.
