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Is Imperva A Likely Takeover Target Following Q2 Negative Pre-Announcement?

Is Imperva A Likely Takeover Target Following Q2 Negative Pre-Announcement? - Imperva, Inc. NYSE:IMPV

Buckingham Research recommends investors build positions in Imperva Inc IMPV 4.08% shares, as it sees increased shareholder activism following the recent negative pre-announcement, which could possibly be leading to a sale of the company.

Imperva, a cybersecurity firm, now sees second-quarter non-GAAP net loss per share in the range of $(0.20) to $(0.22) versus the prior forecast of $(0.02) to $(0.04).

The company also slashed its revenue outlook to a range of $57.5 million to $58.0 million from earlier guidance of $65.5 million to $66.5 million. Buckingham now expects a second-quarter loss of ($0.20) a share and revenue of $58 million versus a loss of ($0.04) a share and revenue of $66 million.

Imperva attributed the guidance cut to extended sales cycles across most geographies, verticals predominantly relating to larger deals and the breaking up of purchases into phases instead of large upfront purchases.

Full-Year Not Updated...Yet

However, the company did not update its full-year guidance. That said, given the size of the cut, the brokerage expects a significant downward revision when the company reports full results on August 4. Despite the miss, management cited no change in the competitive environment or win rates.

"[W]e think the activist's leverage likely increases, with some cost cutting on the way, but more importantly, pushing the prospects for a sale higher. We continue to believe investors should add or build positions given the expected weakness," analyst Rohit Chopra wrote in a note.

Chopra's thesis was reinforced by a Bloomberg report that said Imperva has hired Qatalyst Partners to explore a sale after receiving unsolicited takeover interest.

On Others' Watch Lists

Redwood Shores, California-based Imperva is targeted by activist investor Elliott Management Corp., which had amassed 9.8 percent of Imperva and started a dialogue with the company's board about "strategic and operational opportunities." According to a regulatory filing, as of June 28, Elliott management had increased its stake to 10.9 percent.

Chopra reiterated his Buy rating on Imperva shares and cut his price target by $10 to $50, implying an upside of 5 percent from Tuesday's close.

Shares of Imperva closed Tuesday's regular trading session at $47.58 and were trading essentially flat in Wednesday's pre-market session.

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Jul 2016Deutsche BankDowngradesBuyHold
May 2016NeedhamDowngradesBuyHold
Apr 2016Morgan StanleyDowngradesEqual-weightUnderweight

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