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Barracuda Networks (CUDA) Earnings: What To Expect Jul 19, 2017

Data security specialist Barracuda Networks (CUDA) is set to report second quarter fiscal 2018 earnings results after the closing bell Monday.

Betting on cybersecurity stocks have been a profitable trade in 2017, thanks to the number of high-profile hacking-related headlines, causing businesses and consumers to wonder if they're next. Although CUDA shares, which have risen 11% year to date, haven’t been breathtaking — not compared to, say, the 30% and 28% respective gains made by FireEye (FEYE) and Fortinet (FTNT) — Barracuda’s cloud-enabled solutions will keep its products in high demand for the foreseeable future.

Unlike some competitors, Barracuda’s hybrid cloud solutions gives it an added advantage from the standpoint that it can optimize customers’ local hardware, while also helping customers to better address security threats, manage network performance, and protect and store their data. But after the 17% drop following its third quarter results, caused by weaker-than-expected guidance, the Campbell, Calif.-based tech company can win back investors’ confidence with a beat-and-raise quarter.

For the three-month period that ended May, Barracuda is expected to report 18 cents per share on revenue of $91.15 million. If you’re following the so-called whisper number, CUDA could post EPS of 20 cents per share. This compares to the year-ago quarter when the company earned 20 cents per share on $86.65 million on revenue.

CUDA stock took a merciless beating even though the company delivered a beat on both the top and bottom lines, while showing significant growth on both measures. Not only did first-quarter revenue of $86.7 million rise 11% year over year, it was almost $3 million higher than the average analyst estimate. Recurring subscription revenue, meanwhile, which measures the strength of the underlying business, jumped 20% year over year to $65.3 million.

Combined with a 14% rise in the number of active subscribers, reaching 286,000, Barracuda showed consistent growth trends. The problem? On the conference call with analyst, CFO Dustin Driggs not only guided for fiscal year 2018 revenue to be between $370 million to $380 million, suggesting only a 6% rise at the midpoint, EPS guidance of 73 cents to 79 cents was below the Street’s 82 cents. The miss on EPS guidance caused a rash of profit-taking.

On Monday, regardless of what the top and bottom line numbers reveal, investors will pay attention to the Q3 and fiscal year guidance on both measures with even more scrutiny. Wall Street is already modeling EPS of 19 cents for the August quarter on revenue of $87.93 million. Full-year ESP is expected to decline 5 cents year over year to 77 cents per share, while revenue of the $376.77 million is projected to grow at 6.8% year over year.

Given the ever-connected world in which we live, cybersecurity will remain an increasingly important part of peoples lives and the health of businesses, fueling growth in the likes of PureFunds ISE Cyber Security ETF (HACK) and First Trust Nasdaq Cybersecurity ETF (CIBR). In the case of Barracuda, investors who are looking for a small-cap growth tech stock operating in two vibrant markets — namely data security and cloud computing — can do well here over the next 12 to 18 months.