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Unusual Upside Call Buy in Emerging AI Data Protection Leader

by | Mar 9, 2024

Commvault Systems (CVLT) saw an unusual aggressive buy of 600 October $115 OTM calls for $4.40 on 3/6 which follows a recent surge in shares to record highs following earnings finally clearing highs from back in 2013. The long-term range breaks measures to an upside target of $130 which is near a 1.618 Fibonacci extension target of $126. Commvault delivers a portfolio of products and services to effectively secure, defend and recover data from ransomware attacks or any other threats. Its offerings are organized into four categories – (1) Data Recovery, (2) Data Compliance & Governance, (3) Data Storage and (4) Data Security. Commvault’s platform is managed through a single pane of glass called the Commvault Command Center. Commvault HyperScale X is an intuitive, easy-to-deploy and scale-out, integrated data protection solution to help enterprises transition from legacy scale-up infrastructures. Metallic ThreatWise combines sophisticated early warning and early action with comprehensive data protection. CVLT has a market cap of $4.3B and trades 30.8X Earnings, 22X EBITDA, 4.9X EV/Sales and 23X FCF. CVLT revenues are seen rising 6.6% in FY25, slight acceleration from FY24 which has one quarter remaining while EPS growth seen at 9-10% for FY25. CVLT appears to be at a key inflection point as has been the case in many software names the past few years transitioning to more of a cloud subscription model. In the latest quarter, subscription revenue rose 31% and now represents just over half of total revenue. Commvault’s products and services are in more demand than ever, especially as companies grapple with how to keep their data secure, compliant and resilient in a world increasingly under threat of cyber-attacks. Commvault Cloud powered by Metallic AI was introduced in November providing AI capabilities, giving customers automated and predictive recovery, threat intelligence and operational efficiencies to deliver true cyber resilience. The platform integrates with major hyperscalers, as well as leading cybersecurity and AI companies like Avaya, Darktrace, Databricks, Microsoft Sentinel and Palo Alto Networks, among others. CVLT delivered a 125% NRR last quarter and highlighted strong up-sell as well as the maturing renewal cycle and driving to really strong growth renewal. CVLT’s business momentum combined with a very reasonable valuation making inroads into a very sought-after solution in data in the age of AI certainly makes it a potential compelling acquisition target.

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