Competition in the cyber-security world is hotting up, says Deutsche Bank, which has downgraded Sophos Group PLC (LON:SOPH) to ‘hold’ from ‘buy’.
The shares were off 6.5% at 483.8p following news of the downgrade – almost 50p below Deutsche Bank’s (DB) target price of 530p, which has been cut from 630p.
READ: Sophos Group's warning catches market on the hop
The shares slumped in early July when the company reported below-par billings growth in the first quarter of its current fiscal year and DB reckons achieving full-year guidance will be challenging.
The German bank hears on the grapevine that things in the end-point market – network security that keeps desktops, servers, mobile devices and so on safe from threats - are toughening up.
Sophos’s next-generation endpoint solution, Intercept X, saw strong growth in the year to the end of March 2018, having been released in September 2016, but DB thinks the gloss on the newish product is already starting to come off.
“Competition in Endpoint appears to be worsening, and we see increasing evidence of enterprise-level next-gen players attacking the mid-market. As such, pricing is anecdotally tough across both traditional and next-gen Endpoint which we believe was a significant factor behind the -5% CCY [constant currency] End-user billings in 1Q19,” DB said.