IRNT Stock Is a Good Bet Amid Digital Shift and Cybersecurity Threats

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Sep. 15 2021, Published 12:52 p.m. ET

IronNet Cybersecurity (IRNT) stock was trading sharply higher on Sept. 15. The company went public through a reverse merger with LGL Systems Acquisition (DFNS). What’s the forecast for IRNT stock and is it a good investment?

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IronNet provides cybersecurity solutions. The medium to long-term forecast for the industry looks positive due to growing cybersecurity threats. There has been a spate of cyberattacks recently that have highlighted the importance of cybersecurity solutions.

IronNet stock surges after earnings

IronNet released its fiscal second-quarter 2022 earnings on Sept. 14. It reported revenues of $6.1 million in the quarter compared to $7.9 million in the same quarter last year. The company had an ARR (annual recurring revenues) of $24.1 million compared to $19.5 million in the second quarter of fiscal 2021.

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IronNet’s customer count more than doubled from 22 to 51 during the period. However, its dollar-based average contract length fell from 3.2 to 2.8.

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IRNT reported an operating loss of $17 million compared to $14.2 million during the same period last year. The company maintained the fiscal 2022 revenue guidance of $43 million–$45 million and expects the ARR at $75 million by the end of the year.

Cybersecurity company Darktrace, whose primary listing is in London, also reported better-than-expected results on Sept. 15. The company raised its guidance, which led to a spike in the stock.

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IRNT stock forecast

Currently, no Wall Street analysts are covering IRNT stock since it has been listed for less than a month. The forecast for the stock looks positive based on the outlook for cybersecurity. The company has also been making new partnerships.

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IronNet has been certified as an integration partner in the MISA (Microsoft Intelligent Security Association), which is a platform for independent software vendors. The company has been expanding its revenue base and has also entered into a partnership with Mandiant, which is a part of FireEye.

James Gerber, the IronNet CFO, said, “Our cloud-based subscription revenue -- which grew to 60% of product revenue in the first half of the year, a 65% year-over-year growth rate -- is a strong proof point for the business and underscores the fully recurring aspect of our financial model.”

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Is IronNet stock a good investment?

IronNet looks like a good investment based on the growth outlook. The company expects its revenues to more than double to $110.8 million in fiscal 2023. IronNet expects its revenues to rise to $287.5 million by fiscal 2025. Currently, IronNet has a market cap of $2.24 billion.

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This gives us a fiscal 2024 price-to-sales multiple of 7.8x. The valuations don’t seem unreasonable considering the strong top-line growth. Also, given the business model, which has a high percentage of recurring revenues, the valuations look justified.

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IronNet’s Collective Defense platform uses AI-driven behavioral analytics to detect cyber anomalies. According to the company’s estimates, its total addressable market opportunity is expected to grow to $41.1 billion in 2024.

While the digital transformation has been a boon for several companies, it has also led to more cybersecurity threats. IronNet looks like a good stock to buy and play increasing cyber risks as the world goes digital.

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