Analyst Kash Rangan of Goldman Sachs reiterated a Sell rating on SolarWinds (SWI – Research Report), retaining the price target of $13.50.
Kash Rangan has given his Sell rating due to a combination of factors that suggest potential challenges for SolarWinds despite its recent financial performance. While the company did outperform market expectations in terms of subscription revenue, total revenue, and adjusted EBITDA, Rangan highlights that the magnitude of revenue outperformance has decreased compared to the previous fiscal year. Moreover, while SolarWinds has shown operational efficiency during its transition to a new business model, there are concerns regarding the speed and clarity of its shift from maintenance to subscription-based services, which represents a significant untapped market for the company.
Additionally, Rangan notes that although SolarWinds has shown a robust profitability profile, with a strong adjusted EBITDA margin being the highest since 2020, there are external factors that could pose risks to the company’s performance. He points out the increasingly competitive environment, particularly with the rise of cloud-native vendors that may challenge SolarWinds’ market position. Furthermore, there are lingering concerns related to the repercussions of the December 2020 cybersecurity incident, which could have ongoing impacts on the company’s reputation and customer trust. These points underpin Rangan’s cautious stance on the stock and his decision to maintain a Sell rating.
Rangan covers the Technology sector, focusing on stocks such as Adobe, Microsoft, and Informatica. According to TipRanks, Rangan has an average return of 9.5% and a 57.61% success rate on recommended stocks.
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SolarWinds (SWI) Company Description:
SolarWinds Corp. engages in the provision of information technology (IT)infrastructure management software. It provides network management, systems management, database management, IT security, IT helpdesk, and cloud services. The company was founded in 1999 and is headquartered in Austin, TX.
