Qualys Earnings: Quality Margins to End 2023 As Top-Line Expansion Moderates

We raise our fair value estimate for narrow-moat Qualys to $155 from $143 after the firm closed out 2023 with a strong set of financial results. While the firm’s initial outlook for 2024 was lower than our prior estimates, we still view a path for Qualys to maintain a low teens revenue growth profile over the next five years while increasing its profitability as it scales. We remind investors that while the company’s top-line expansion is below that of other higher-growth security peers, Qualys’ margin profile is among the best in our security coverage. From a longer-term perspective, we believe Qualys is well-positioned to serve a variety of cybersecurity needs for its small and medium business-leaning customer base. The firm’s cybersecurity capabilities range from vulnerability management to compliance-related security solutions. We believe this breadth of offerings can provide Qualys with further revenue expansion opportunities within its installed base and help entrench its solutions within a client’s IT stack. The firm’s shares traded down after hours, and we view them as fairly valued after our fair value increase.