Liberum downgrades Sophos on weaker full-year billings

21st Jan 2019 13:21

(Sharecast News) - Liberum has cut its recommendation on Sophos after the FTSE 250 cybersecurity specialist warned on profits.Sophos posted its third-quarter numbers on Friday, and said that annual billings would be lower than expected, causing the shares to plunge 25%. The firm blamed falling sales of hardware upgrades and sales to new customers.The third-quarter numbers also disappointed, with billings ahead 2% against a 14% increase a year earlier.In a note published on Monday, Liberum said it believed Sophos remained "a solid business, with leading cybersecurity tech and good cash generation". It also applauded moves by the firm to manage its debt levels and de-leverage "quickly".But it added: "However, weakness in hardware and new customer billings, and high risk around management's billing forecasts, evidence by this year's third conservative downgrade, led us to downgrade the stock."It argued that the "sequence of misses and downgrades makes Sophos a less attractive stock and we believe the street needs reassurances that the company is able to meet its targets."It also complained of a lack of visibility around billings. "The main source of information around Sophos business activities are market updates and reports by peers, making assessments over trading levels highly dependent on management's communications with markets."The bank now has 'hold' on the stock, down from a 'buy', with a price target of 320p, against its previous target of 400p. It is forecasting full-year billings of $765m, slightly below 2018 and 5% below Liberum's earlier estimate.