The liquid software company JFrog (FROG) inked a cash and stock deal to snap up Vdoo Connected Trust Ltd. for $300 million, expanding its end-to-end DevOps platform offering. Upon closing of the proposed acquisition, JFrog expects its total operating costs to increase by $9-10 million for the remainder of 2021.
Commenting on the deal, Needham analyst Jack Andrews said that it will create multiple product synergies as JFrog shifts further into security.
According to Andrews, Xray’s software composition analysis is used by developers to protect containers and applications within CI/CD pipelines. This acquisition will fulfill the need of customers for an end-to-end platform, which makes software running in production vulnerability-free. (See JFrog stock chart on TipRanks)
The analyst commented, “The acquisition delivers deep synergies that allow FROG’s existing base to leverage more security features outside the upstream scope of CI/CD.”
At present, Vdoo’s revenue is insignificant to JFrog. The first product of the combined entity is expected to be launched in mid-2022. Though no further financial details were provided by the company, Andrews is upbeat about the deal and believes that “the combined solution advances FROG’s vision of liquid software delivery by removing security bottlenecks. Moreover, the growing convergence of DevSecOps allows FROG to address a growing range of new personas and markets.”
Based on JFrog’s revenue growth and margin metrics, the five-star analyst reiterated a Buy rating and a price target of $86, implying an upside potential of 82.7% from current levels.
The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating. That’s based on 3 Buys and 5 Holds. The average JFrog price target of $59.14 implies upside potential of 25.9% from the current levels. JFrog shares have increased around 14% over the past month.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 66% Bullish on FROG, compared to a sector average of 69%.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your analysis before making any investment.
