Will Tenable Hit Analysts' Price Target As It Continues To Rally?

Mid-cap Tenable Holdings NASDAQ: TENB is up 4.5% since reporting better-than-expected third-quarter results in late October. 

The Maryland-based company provides cybersecurity solutions for enterprise clients internationally. It serves clients in a number of verticals, including automotive, building management, energy, finance, healthcare, medical manufacturing, oil and gas, retail, transportation, water, and government agencies. 

The company’s focus is a relatively new cybersecurity designation, Cyber Exposure. The company’s products measure risk across various infotech assets, such as networks, desktops and customers’ on-site servers.

The company went public in July 2018 so is within the window of time when newly public companies often post big price gains. That happens because these younger companies have a product or service that’s in high demand (cybersecurity being a prime example) and management teams that are nimble and eager to drive growth.

Tenable earned $0.07 per share in the most recent quarter, down 22% from a year ago, but still ahead of analysts’ views, which called for earnings of $0.02 per share, according to MarketBeat data. 

Double-digit revenue growth

Revenue came in at $138.66 million, topping views of $134.61 million. That marked year-over-year growth of 23%. Revenue growth accelerated in the past two quarters, from 20%. Over the past eight quarters, Tenable grew revenue at rates from 20% to 29%.

For the full year, Wall Street pegged earnings at $0.31 per share, which would be a 63% increase over 2020. That number was revised higher recently. The company turned profitable in 2020, following several years of losses, which is entirely common and often expected with a new tech firm. Younger companies like Tenable often have growth as a focus for several years, rather than profitability. 

The company has beaten earnings and revenue views in each quarter for the past three years.

MarketBeat analysts’ ratings show the consensus estimate on Tenable is a “buy,” with a price target of $62.92, representing a 16.37% upside. 

Let’s dig into those numbers, beginning with the stock’s price action. Tenable has been forming a cup-shaped base since January 19, when it peaked at $58.45. That sounds like a long time, but bases often take shape over the course of a year. 

It is currently adding a handle to that cup, which is offering a lower buy point, above $56.84. While it may sound counterintuitive that a pullback can be an encouraging sign, a handle often represents an area where institutional investors are taking some profits after a stock runs up from a prior low. 

Etching the right side of a base

In this case, Tenable began etching the right side of its base in early May, although it’s been a choppy ride. Even so, investors who bought at the bottom, or near that point, are often prepared to take some profits once the stock has rallied somewhat. You can see that phenomenon in the handle. 

As the stock climbed out of its base, it rose 26.04% in the past three months. Year-to-date, it’s up just 3.27%, and it advanced 55.62% in the past year. 

In that context, the consensus price target does not seem out of the question. 

However, don’t be surprised if Tenable takes a minute to reach that target. As we’ve seen, this stock has been a slow and steady climber, with plenty of small pullbacks along the way. 

Often, a surprisingly good earnings report is the catalyst for a major price increase, but that hasn’t really been the case lately for Tenable. The stock has either declined or risen slowly following quarterly reports this year. 

Since the earnings report, six analysts boosted their price targets on the stock. 

So is Tenable a buy right now? For starters, wait to see if it can surpass that handle high price of $56.84, ideally in heavy trading volume. If that happens, and if the stock continues trending higher without declining 6% or more beneath that buy point, then this one could be on its way to hitting that price target.