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Here’s Why Cellebrite Is the Hottest  Stock This Week
Stock Analysis & Ideas

Here’s Why Cellebrite Is the Hottest Stock This Week

Story Highlights

As the broader market turmoil continues, we are highlighting a compelling bargain pick that looks set on a growth trajectory and has carved out a niche for itself.

The broader markets are now firmly in bear territory, and Russia is all set to default on its foreign debt obligations. A large cross-section of the market has seen a substantial correction, and investor pain is all too visible.

This, as Warren Buffett would agree, is the time to go bargain hunting. In sync, we are putting the spotlight this week on Cellebrite (CLBT), a name that is a leader in its niche and offers a potentially attractive entry point.

Why Cellebrite?

Cellebrite is on a mission to deliver accelerated justice, save lives, and preserve privacy for communities globally. From the crime scene to the courtroom, Cellebrite offers a suite of solutions through its software platform for the complete investigative workflow.

The company provides license-based as well as subscription solutions and has amassed compelling growth metrics. Each year, over 500,000 legally sanctioned investigations use the company’s solutions. It has a customer base of more than 7,000 that seeks Cellebrite to address the quantity and complexity of digital evidence, the inefficiency in current data management, and the growing need for selective extraction and analysis.

To mitigate the challenges, Cellebrite delivers fast and automated data collection and review, investigative digital evidence management, and investigative analytics with the help of multi-data ingestion and AI engines. Cellebrite estimates its addressable market size at $13.2 billion, assuming a fully digital transformation in investigative work.

The company already has over 100 North American federal accounts, 15 U.S. Cabinet Executive departments, 27 E.U. national police members, and all 50 U.S. states in its customer base. Moreover, 68 of the Fortune 100 companies are already using Cellebrite’s services. Major private sector clients include seven of the top ten pharma companies; eight of the top ten U.S. software companies; and eight of the top ten U.S. commercial banks.

Cellebrite is aiming to keep up this growth trajectory with increased life-time value (LTV) via subscriptions and flexible consumption models, license growth, new customer additions, and the adoption of enterprise-grade solutions.

Robust Financials

While the COVID-19 pandemic affected a number of industries, Cellebrite has proved its resilience. Revenue has ticked upwards from $171.8 million in 2019 to $246.2 million in 2021. For 2022, the company expects revenue to be between $285 million and $300 million. It expects gross margin to range between 80% and 82% for 2022.

Moreover, between 2020 and 2021, Cellebrite has seen 11x annual recurring revenue (ARR) growth from the European National Police and 6x ARR growth from the U.S. State police. ARR is estimated to be between $250 million and $265 million in 2022.

Market Participants Are Gunning for Cellebrite

It’s not a surprise then that different stakeholders remain gung-ho about the stock. Needham analyst Mike Cikos has a Buy rating on Cellebrite alongside a price target of $6. Cowen & Co’s Shaul Eyal also has a Buy rating alongside a $13 price target that implies a massive 146.68% potential upside.

Overall, the Street has a Strong Buy Consensus rating on Cellebrite based on four unanimous Buys. The average Cellebrite price target of $9.67 implies an 83.5% potential upside.

Simultaneously, hedge funds increased holdings in the stock by 1.3 million shares in the last quarter, indicating a very positive hedge fund confidence signal. Moreover, Cathie Wood’s ARK Investment Management has initiated a position in Cellebrite for around $2.6 million.

TipRanks data also shows our users are positive on Cellebrite and their number of Buy transactions is nearly 1.5 times the number of Sells on Cellebrite. Additionally, the number of portfolios on TipRanks that hold Cellebrite has increased by 8.2% over the past thirty days alone.

Closing Note

Cellebrite has carved out a compelling niche for itself in digital intelligence, and the company may have a long growth trajectory ahead of itself.

The stock is down nearly 50% over the past year but is already up 20.6% over the past month. With a market cap just shy of $1 billion and a P/E ratio of 18.2, the stock may offer an attractive entry point given the rout in the broader markets.

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