Safe-T Group Ltd. (NASDAQ, TASE: SFET) stock is taking a consolidation breather after ramping higher by over 10% to start the new year. However, as SFET enters 2023 with considerable revenue-generating momentum at its back, that pause may be short-lived. In fact, the time may be ripe for trading ahead of Q4 numbers knowing that its Q3 results were not just impressive; they were record-setting. The better news: guidance coupled with aggressive cost-cutting has positioned SFET to deliver more of the same, and not only in its Q4 performance but for all of 2023.
That bullish presumption is warranted. Last month, SFET announced a strengthening market opportunity that its wholly-owned subsidiary and enterprise privacy network unit, NetNut, is poised to seize. The company has its sights set on an enormous revenue-generating opportunity from current and prospective clients in the price comparison website (PCW) market, a sector valued at an estimated $2.8 billion according to a report published by DataINTELO research. But the better news for SFET and NetNut is that those estimates date back to 2019. With an expected CAGR of 8%, SFET assets are staring down a $6 billion market by 2030. That means that in addition to SFET being ideally positioned to get bigger faster, investors at these levels can also win.
And keep in mind that SFET is already taking advantage of its opportunities by offering best-in-class optimization solutions to several business segments needing innovative and client-specific cyber-security solutions. Actually, they are more than just offering – they are delivering.
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Record Earnings In Q3, Guidance Is Bullish
In Q3, SFET noted that NetNut doubled its usage volume and processed over 36 billion customer requests over a comparative monthly period. Growth was attributed to the onboarding of several strategic customers that facilitated NetNut’s network ability to process billions of requests compared to prior periods. While impressive at current run rates, expectations call for more growth, with further client acquisitions likely as they become better acquainted with NetNut’s ability to improve price comparison capabilities, provide users with seamless and competitive business analysis, and, most importantly, increase productivity.
But NetNut isn’t the only asset contributing to SFET’s record-setting Q3 performance. Revenue contributions from other products in its enterprise privacy solutions, consumer cyber-security and privacy solutions, and enterprise cyber-security solutions segments add to the company’s steepening growth trajectory.
Its cybersecurity and privacy solutions for basic and advanced consumers provide a substantial security blanket against ransomware, viruses, phishing, and other online threats. It also provides users with a robust, secure, and encrypted connection, masking their online activity and keeping them safe from hackers. A second segment, privacy solutions for enterprises, is powered by the world’s fastest and most highly secured proxy network that enables customers to anonymously collect data at any scale from any public source over the web using a unique hybrid network. In addition, the SFET network comprises both entry and exit points based on its proprietary reflection technology, leveraging the power of hundreds of optimally designed servers located at ISP partners worldwide that help guarantee the service’s privacy, quality, stability, and speed.
Its third value driver targets business from clients needing enterprise cybersecurity solutions. This revenue stream is accretive through its global information securities provider, TerraZone Ltd. Designed for cloud, on-premises, and hybrid networks, these tailored solutions mitigate attacks on enterprises’ business-critical services and sensitive data. They also ensure uninterrupted business continuity by protecting data access, storage and exchange breaches, and threats from both within and outside the organization by utilizing a “validate first, access later” philosophy.
Perhaps the best news from a company and investor’s perspective is that these assets aren’t just targeting these opportunities; they are seizing them, delivering record-setting results at a pace that industry giants like Rapid7, Inc. (NASDAQ: RPD), Palo Alto Networks (NASDAQ: PANW), and Cisco (NASDAQ: CSCO) can’t keep pace with. Evidence of that is in the quarterly results published.
Seven Consecutive Quarters Of Growth
For its Q3 ending September 30, SFET reported impressive growth. In fact, they were record-setting. Specifically, revenues for the comparative period surged by 42% to a record $4,812,000. For the nine-month, or YTD comparison, SFET revenues rose by 109% to $13,610,000. Notably, results for both periods measured exceeded prior guidance. Just as important to the significant growth is that those revenues are falling faster to SFET’s bottom line.
Gross profit for the nine months surged by 143% to $7,360,000 over last year’s comparable, and for the three months ending September 30, gross profit scored 47% higher than the previous year’s period to reach $2,627,000. While impressive, SFET enters Q4 showing no signs of slowing. Thus, from a forward-looking perspective, even better results could be in the queue. And when noting the aggressive reductions in non-accretive operating expenses, that bullish expectation is more than likely; it’s probable.
Currently, two industry analysts support that assumption, modeling for a median 12-month price target of $5.50 – more than 103% higher than current levels. With only about 3.26 million shares outstanding, if SFET confirms that its path remains biased to record-setting in Q4 results, reaching that target could happen sooner than later.
Positioned To Rally In 2023
Frankly, trading ahead of Q4 results may be a wise consideration. Remember, SFET has delivered consecutive growth over the past seven quarters. More importantly, they’ve provided evidence that they will enter the new year better positioned than ever to keep that winning streak alive. In fact, they are showing growth across all of its revenue-generating channels.
Recent updates, like that about NetNut, highlight organic growth and the ability to capitalize on strengthening market positions. Better still, the momentum behind that growth looks strong, evidenced by its enterprise privacy business turning profitable and scoring its own record-setting numbers. Moreover, they noted that another subsidiary, CyberKick, is performing better than expected, stirring belief that income from that asset could contribute considerably more to revenue streams in the near term. Thus, appraising SFET on a sum of its parts, supported by company updates, exposes a disconnect between share price and performance. And with roughly $8.1 million in cash, which includes $4.3 million raised after Q3, it’s an imbalance serving up a timely investment opportunity.
A Bullish Proposition In Play
Most important to that consideration is that SFET isn’t sitting idle. Instead, they are actively pursuing revenue-generating opportunities from clients across multiple sectors needing the type of cyber-security solutions SFET sells. Keep in mind, having the assets and managerial expertise to reach that demand should be considered an asset in itself that separates SFET from others in the space.
Yes, there are big names in the sector, and yes, they offer specific solutions. But what’s different about SFET is that they are nimble, an appreciable difference from large-cap competitors that may find it difficult to quickly reprogram to address cyber-threats that change almost daily.
In that sense, being small has its advantages. While SFET currently meets that description, a growth spurt is certainly not out of the question. In fact, strategic initiatives, formidable assets, a strong balance sheet, and expert management indicate that SFET is getting bigger. And with record revenues and strengthened bottom-line performance, the best news may be that historical performance could be a precursor of better things to come.
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