Possible buying opportunity after market’s ‘extraordinary’ over-reaction
Thursday 15 Feb 2018 Author: Steven Frazer

Analysts have rallied to the cause of cyber security software supplier Sophos (SOPH) in the wake of a big sell-off in its share price.

One analyst insists that the market reaction has been ‘over-done’ since the company’s third quarter update on 8 February and that there is a solid buying opportunity with 40%-plus upside potentially on offer to investors.

Another supportive number cruncher has even called the market’s response to the trading update as ‘myopic’ and ‘extraordinary’ even allowing for current volatility in stock markets.

Of the 11 analysts covering the stock, 10 have a 'buy' recommendation.

Sophos’ trading update showed a rough $10m miss to billings expectations (it reported $194.8m for the three months). Adjusted operating profits slipped 6% year-on-year while cash generation was also on the weak side.

This was largely down to investment in the product suite, where Sophos has recently launched a new line of XG Firewall products and newly improved InterceptX, its artificial intelligence malware defence suite.

The news sparked a 17% share price drop on the day, with subsequent weakness taking the stock down to 479.6p. That means more than £500m has been wiped off the company’s valuation in less than a week.


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