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Wall Street’s Best Digest Daily Alert

This tech company is expected to grow by 35% on average, in the next five years.

This tech company is expected to grow by 35% on average, in the next five years.

Radware Ltd (RDWR)
From The Cutting Edge

Radware Ltd (RDWR) is a Tel-Aviv-headquartered firm that bills itself as a “global leader of application delivery and application security solutions for virtual and cloud data centers”. As a core component of its business, Radware provides something known in the IT world as network “load balancing”.

Load balancing is pretty much what the name implies: balancing a network’s traffic, or load, as efficiently as possible, with the purpose of preventing any sort of downtime. This is done by distributing incoming traffic across a group of backend servers, or what’s otherwise known as a server farm or server pool. If a server ever does go down, the load balancer will create a detour to other working servers.

Given the importance of uptime to a firm’s operations, this makes load balancers critical to application delivery. Some enterprises depend entirely on the delivery of IT and networking services for revenue. Downtime costs are especially damaging for telecommunications service providers, e-commerce companies, and ad networks, to name few.

A USA Today survey of 200 data center managers recently found that over 80% of these managers report downtime costs greater than $50,000 per hour. For over 25%, downtime cost exceeded $500,000 per hour! Needless to say, load balancing as a method to prevent such downtime is often critical.

The company also provides multiple lines of defense against what are known as DDoS attacks. DDoS attacks work to overload networks by spamming them with a malicious army of bots, which are distributed across a network of infected computers (hence the name “Distributed Denial of Service”). This can be done with personal computers and smartphones, but more recently DDoS attacks have been taking advantage of pervasive IoT devices, which often come with less security.

Arbor Networks estimates that 2,000 of these attacks occur on a daily basis, while Verisign/Merril Research estimate that one third of all network downtime results from DDoS attacks. These DDoS attacks can be purchased on the black market for as little as $150 for a week-long attack. This means virtually anyone can pay a small fee to disrupt websites they disagree with or to jam up an organization’s online operations.

The most important thing you really need to know is that business is booming. Revenue for the company’s recently reported fourth quarter came in at $58.5 million, up 13% from the same period last year. Radware has performed especially well in the Americas, with revenue up 27% from last year. This region accounts for nearly half (49%) of the firm’s the top line. EMEA increased 1% and represented 26% of total. Asia Pacific was up 4% and represented 25% of total. The company, in other words, is incredibly well diversified geographically.

Full year revenue for fiscal 2017 came in at $211 million, up 8% from 2016. This tells us that growth accelerated in the most recent quarter.

As for the bottom line, Radware spent most of 2017 in the red as it transitioned to a SaaS (software as a service) model but, with the transition completed, it’s now back in the green. Fourth quarter net income was $2.12 million and is trending upward.

Radware’s customer base is immense, with the company serving more than 10,000 enterprise and carrier customers worldwide. The company has less than 1,000 employees, who average ~$224,000 in revenue each.

Radware’s balance sheet is incredibly strong, last showing $469 million in assets, with $154 million in liabilities. The company last recorded $344 million in cash/investments with zero debt.

Radware expects an 8% to 10% revenue growth in full year 2018, with first quarter revenues to be between $53 million and $55 million.

We rate Radware Ltd (NASDAQ: RDWR) a Buy under $23.50. The risk level is ‘Medium’.

Jason Stutman, The Cutting Edge,, 877-303-4529, April 3, 2018