Safe-T Group Ltd. (NASDAQ, TASE: SFET) stock is starting 2023 in a bullish mood. Since the start of the year, SFET shares are higher by over 10% to $2.70 at press-time on Wednesday. And the better news from an investor’s perspective is that the momentum into the new year is fueled by updates showing that SFET is doing more than growing quickly; it’s also setting records for both top and bottom-line performance. For a low-float company like SFET, that combination is a recipe for share price appreciation.
Of course, companies need the operations ammo to support such a proposition, and Safe-T Group does. In December, SFET announced that its wholly owned subsidiary and enterprise privacy network unit, NetNut, is positioning itself to take advantage of potentially enormous revenue-generating opportunities from current and prospective clients in the price comparison website (PCW) market, one which DataINTELO research estimated to be a $2.8 billion global industry in 2019. But, while significant then, the market opportunity is getting more substantial, with an expected CAGR of 8% through the end of this decade, creating a revenue-generating target market of over $6 billion.
And SFET isn’t wasting time addressing that potential. They are already promoting best-in-class optimization solutions to several client segments that could lead to this small-cap cyber-security company being on its way to earning a big-time share. If so, despite the recent run and with stocks generally trading on a forward-looking perspective, there’s plenty to support that the SFET rally will continue.
Video Link: https://www.youtube.com/embed/7fQeDbO2B80
An Impressive Sum Of Its Parts
Growth is the driving factor. In its Q3 earnings report, SFET noted that NetNut has 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 and integrations facilitating NetNut’s network ability to process billions of requests compared to prior periods. While impressive, another takeaway was commenting suggesting that SFET expects more client acquisitions, a result of them becoming better acquainted with NetNut’s ability to improve price comparison capabilities, provide users with seamless and competitive business analysis, and, most importantly, increase productivity.
Still, while NetNut may be earning recent headlines, there’s plenty more contributing to SFET’s record-setting growth. In fact, SFET enjoys revenues from three business segments: enterprise privacy solutions, consumer cyber-security and privacy solutions, and enterprise cyber-security solutions. They not only offer specific client solutions, but they also diversify SFET’s revenue streams.
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.
A third value driver, enterprise cybersecurity solutions, is available through its reseller, TerraZone Ltd., a global information security provider. These solutions are designed for the cloud, on-premises, and hybrid networks and 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.
These assets aren’t only showing opportunity; they are delivering record-setting results that industry behemoths like Rapid7, Inc. (NASDAQ: RPD), Palo Alto Networks (NASDAQ: PANW), and Fortinet (NASDAQ: FTNT) can’t keep pace with.
Record Revenues And Consecutive Quarterly Growth
Noted above, SFET reported record-setting growth in Q3. Revenues for the three months ending September 30, 2022, reached a record $4,812,000, 42% higher than last year. Even more impressive is that on a nine-month comparison, SFET assets combined to deliver a more than 109% increase in comparative revenues to $13,610,000. Both measures exceeded guidance. But perhaps more importantly, those revenues are falling faster to the 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 $2,627,000, 47% higher than the previous year’s period. While those numbers are historical, the excellent news for those appraising the forward-looking SFET value proposition is that aggressive reductions in non-accretive operating expenses are expected to provide a tailwind into Q4, setting up 2023 for record-setting performances and consecutive quarterly growth to continue.
Analysts are bullish. In fact, the two covering SFET stock have a median 12-month price target of $5.50, more than 103% higher than current levels. After completing a 1:10 split that leaves only about 3.26 million shares outstanding post-transaction, and with confirmation by SFET that its growth trajectory is strengthening – like the news last week – even those bullish price targets could prove conservative on a revenue multiple bases.
Record Revenues Through Innovative Strategy
That, too, is likely, noting that SFET’s recent financials contributed to its aggregating seven consecutive quarters of revenue growth. That achievement is especially impressive, knowing that expansion has come during some of the most turbulent and challenging times of business history, with pandemic-related issues closing many global economies, disrupting corporate spending, and limiting supply channels. Despite that, SFET navigated its business terrain successfully, delivering consistent operational progress, successfully financing its operations, and facilitating growth through a non-dilutive credit line from a leading Israeli bank and a strategic revenue-share model financing from an industry expert.
The arrangement is proving beneficial to shareholders and lenders, with the non-dilutive funding more than attractive from an SFET stock investors perspective but to financiers too, which, following their own validations, invest in the purchase of consumers (a future asset being customers). That asset, of course, is expected to deliver a consistent, leveraged, and high return on investment. So far, the deals made are win-win propositions. Recent funding through this model allowed SFET to invest $1.2 million in customer acquisition, providing growth for itself and already returning 20% of the investment.
Similar results are expected. With the non-dilutive financing strategy accretive to company growth and attractive to investors on an ROI basis, SFET has been able to guide that future deals could fuel appreciable growth to near and long-term revenues. If that’s the case, analyst price targets will likely need to be revised, and with the bullish setup into Q4 and 2023, they will assumably model higher.
Set For Success In Q4 And In 2023
That expectation is more than warranted; it’s justified. In fact, SFET has provided evidence showing it is in its best position ever to capitalize on and maximize near and long-term revenue-generating opportunities. And they aren’t keeping it a secret.
After its impressive Q3 financials, SFET provided updates highlighting organic growth and the ability to capitalize on its strengthening momentum. That momentum is strong, too, as demonstrated by its enterprise privacy business turning profitable and scoring three months of record-setting numbers. Following that update, recent news about NetNut, and its CyberKick subsidiary performing better than expected, it’s clear that SFET is firing on all cylinders operationally.
Moreover, SFET is well-capitalized to expedite its strategic initiatives. At the end of September, SFET’s cash position totaled about $3.86 million, representing about $0.48 per ADS outstanding. And that cash balance excluded an additional $4.3 million from its recently secured credit facility and investor’s financing.
Thus, while SFET has a full slate of opportunities in its crosshairs, knowing they have the capital to exploit them is an inherent bonus to the SFET value proposition. In other words, the valuation disconnect between SFET stock and company performance may be exposing a gap too wide to ignore. But here’s the deal- those paying attention to what Safe-T Group is saying and, more importantly, doing, aren’t. And that could lead to another leg higher in an already impressive rally.
Many will agree, deservedly so.
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