Commvault stock down as Guggenheim downgrades to ‘neutral’ on growth concerns

Investing.com — Shares of Commvault Systems, Inc. (NASDAQ:CVLT) were down 3.6% in pre-open trade on Tuesday following a downgrade from Guggenheim Securities, which revised its rating on the data protection software company to “neutral” from “buy.” 

The downgrade came as the brokerage expressed tempered optimism about the stock’s future performance, withdrawing its previous $160 price target. 

Guggenheim analysts noted that despite the strong year-to-date stock rally, near-term challenges have emerged, particularly within the company’s sales channels.

Commvault’s shares have surged by 113% this year, outperforming key industry benchmarks like the iShares Expanded Tech-Software Sector ETF, which rose 18% in the same period. 

However, analysts at Guggenheim flagged concerns about recent reseller performance, noting that four out of five partners failed to meet their third-quarter targets. 

Resellers pointed to increased scrutiny around deals and hesitation in corporate spending as key contributors to the weaker-than-expected finish to the quarter.

While full-year revenue targets remain intact for many resellers, the recent softness raises concerns about the company’s ability to deliver consistent growth. 

However, they flagged the company’s second quarter as a potential weak spot given its seasonally low performance and tighter corporate budgets across the sector.

Commvault’s growth strategy includes a focus on cloud-native data protection and security solutions—two areas the company views as essential for future expansion. 

The company has recently made several deals, including Appranix and Clumio, which aim to bolster its capabilities in automated cloud recovery and cyber resilience, respectively. 

While these product initiatives are expected to drive growth, Guggenheim analysts caution that success in these segments requires market share gains in the highly competitive data protection space.

Despite recognizing Commvault’s solid positioning and promising product lineup, the analysts expressed concerns about valuation, citing an enterprise value-to-sales multiple of 7.1x and a 30.5x multiple on 2025 free cash flow projections. 

Given the premium valuation, Guggenheim recommended waiting for a more attractive entry point.

The downgrade comes ahead of Commvault’s results, when the company is expected to provide further clarity on its performance outlook. 

Guggenheim underscores that the stock’s future hinges on its ability to overcome near-term revenue headwinds while capitalizing on new growth areas in cloud security and SaaS backup services​