The stock has more than doubled this year to about 97 times next year's guided profit. Growth is real but partly bought. I see $336.60 in twelve months, about 17% below today.
Key points
- $405.54 a share is about 97 times fiscal 2027 guided earnings of $4.175 a share.
- 24% fiscal 2026 revenue growth leans on acquisitions; CyberArk and Chronosphere added $930 million of revenue and $797 million of operating losses.
- $336.60 target, 17% below the price.
The call
The price demands a lot. At 55 times earnings, a common price for fast-growing software, $405.54 needs about $7.37 a share of profit. Guidance is $4.18 for fiscal 2027.
I believe growth stays strong but cannot close that gap in a year. Revenue should reach $16.3 billion in fiscal 2028. Margins are held back by hosting and memory costs, and a large unnamed AI customer inflated fourth-quarter bookings.
Revenue by fiscal year ($ billions)Source: SEC filings; FY27E from company guidance midpoint, FY28E is my estimate. Oct 2026.
Valuation
| Driver | Figure |
|---|
| Fiscal 2028 revenue (my estimate, 15% growth) | $16.3 billion |
| Fiscal 2028 earnings (non-GAAP, adjusted) | $4.80 a share |
| Value at 60 times earnings | $288 a share |
| Fiscal 2028 free cash flow (40% margin) | $7.70 a share |
| Value at 50 times free cash flow | $385 a share |
| Average of the two = target | $336.60 |
Free cash flow is cash left after spending on the business. I pay a high multiple for durable 15% growth and strong cash. Share count rose about 15% in a year, and stock pay was $1.77 billion. If growth reaches 20%, the stock holds near today's price. Downside is larger than upside.
Risks
- Faster growth from platform consolidation: watch net new annual recurring revenue guidance beating the second-half plan.
- Takeover or buyback support from $7.9 billion of cash and investments: watch repurchase use before the December expiry.
- Rate cuts lift software multiples: watch the 10-year yield.
What would change my mind
Organic growth above 20% with non-GAAP operating margin above 31% would make me move the target toward the current price.