JPMorgan has lowered its price target for Varonis Systems (NASDAQ:VRNS) to $50.00 from $62.00 but kept an Overweight rating as the company approaches its fourth-quarter earnings report. The stock was trading at $34.95 at the time referenced in the original report, well under the revised target and far below its 52-week high of $63.90. Over the past six months the share price has fallen by more than 36%, per InvestingPro data cited in the reporting.
The bank views the upcoming quarterly release as a pivotal event that could restore investor confidence in Varonis’ software-as-a-service business, which the analyst expects will be addressed in greater detail. Varonis’ shares dropped sharply - nearly 50% - after the firm’s third-quarter results revealed weak on-premises renewal activity and execution problems in the final weeks of that quarter. Despite those operational headwinds, the company continues to report strong underlying economics, with InvestingPro data showing gross profit margins of 80.04%.
JPMorgan highlighted that SaaS demand held up in the third quarter, representing 76% of total annual recurring revenue, and estimated that SaaS ARR would reach 83% of total ARR in the fourth quarter. The bank anticipates the earnings release may include more granular SaaS disclosures - potentially SaaS ARR, SaaS net revenue retention, SaaS ARR guidance for fiscal year 2026, and SaaS contribution margins - which could help investors distinguish the performance of recurring cloud offerings from a shrinking on-premises business.
The transition toward SaaS has coincided with top-line growth: Varonis recorded 11.37% revenue growth over the last twelve months. That said, the company has not delivered profitability over the same period. JPMorgan’s analyst described the fiscal 2025 ARR guidance as "kitchen sinked" yet still achievable, and signaled that a constructive fourth-quarter narrative would frame the execution issues as largely confined to the increasingly less relevant on-premises segment.
Varonis is scheduled to report fourth-quarter results after the market close on February 3. JPMorgan added the stock to its Positive Catalyst Watch, indicating the firm sees "meaningful upside potential" from current levels should the forthcoming disclosures and performance meet expectations.
Multiple other brokerages have revised their outlooks in recent days. Varonis reported third-quarter revenue of $161.6 million, up 9.1% year over year but short of Truist Securities’ estimate of $165.5 million. In response, Truist trimmed its price target from $50 to $42 while maintaining a Buy rating.
Morgan Stanley downgraded Varonis from Overweight to Equalweight, citing heightened competition in the AI security space - specifically referencing competitive pressure from Microsoft’s Purview solution - and set its price target at $41. Cantor Fitzgerald reduced its target to $50 from $60, attributing the change to a lower estimated EV/Sales target multiple for 2026 while still regarding Varonis as a category leader with growth potential.
Not all broker reactions were bearish. Piper Sandler upgraded Varonis to Overweight and raised its target to $47 after the company said its on-premises offerings will reach end-of-life by the end of 2026, a strategic move that accelerates the shift toward cloud subscription revenue.
On the product front, Varonis announced a new integration with AWS Security Hub intended to strengthen cloud security by improving visibility and enabling automated remediation. The company described this as an enhancement to its cloud security capabilities, aligning with the broader SaaS transition.
Taken together, the analyst target moves and product updates underscore an evolving strategic and competitive environment for Varonis. Investors will be watching the February earnings release for the specific SaaS metrics and guidance that JPMorgan and others expect to use as the basis for reassessing the company’s growth trajectory and margins.