Ping Id (NYSE:PING) is a pacesetter in buyer identification options, with increasing product portfolio, excessive Annual Recurring Income (ARR)/income progress, profitability, and but affordable valued, making it a purchase. Id options are gaining significance in enterprise spending priorities, as identification is changing into one of many core pillars in securing companies. Cloud and distant work environments are dissolving the enterprise community perimeter. Within the new perimeter-less community world, identification is the brand new pillar of digital safety. Clients, workers, companions and suppliers at the moment are first digitally recognized after which given entry to sources inside the enterprise. As well as, software program purposes and interfaces in addition to units comparable to Web of Issues (IoT) and different community units are all being secured utilizing digital identities. As enterprises deal with securing their networks utilizing Id because the core underpinning expertise, we anticipate Ping Id to proceed to develop within the excessive teenagers to low 20s for subsequent few years. Whereas COVID-19 has impacted leads to the close to time period, we’re assured within the longer-term progress profile and alternative for the corporate. What does Ping do? Since 2001, Ping has been promoting identification and entry administration options (IAM) for big enterprises. Ping is thought primarily for its Single-Signal-On (SSO) and multi-factor authentication (MFA) options. Ping has launched extra options over previous couple of years. It makes a collection of six options which are designed for probably the most demanding enterprises. In contrast to rivals within the house comparable to Okta (NASDAQ:OKTA) that promote options deployed primarily within the cloud, Ping options might be deployed anyplace the shopper needs. Ping is without doubt one of the few on-premise enterprise distributors that has efficiently transitioned from promoting ONLY on-prem to additionally promoting hybrid and cloud options. The next graphic illustrates Ping’s choices.
Supply: Ping Id Web site Ping sells a collection of six merchandise that comprise Single Signal-On (SSO), Multi-Issue Authentication (MFA), Entry Safety, Information Governance, Listing, and API Intelligence. The next chart illustrates the performance of every of those merchandise briefly. Supply: Writer with descriptions from the corporate web site What differentiates Ping from different options available in the market Ping is without doubt one of the few IAM distributors with efficient options that work on-prem along with cloud and hybrid deployments. Its “Clever Id Platform” analyzes gadget community and software conduct in actual time to implement extra safety measures solely when wanted. Ping additionally has a collection of integrations that extends the platform to supply SSO to a whole bunch of enterprise purposes. As well as, Ping platform can scale to hundreds of thousands of identities, that makes the answer extremely efficient for Buyer Id use case. We consider this makes it interesting to companies comparable to Bank of America (NYSE:BAC), Netflix (NASDAQ:NFLX), and so forth. which have hundreds of thousands of customers. Ping options are focused in direction of 1) Buyer Id 2) Workforce Id, 3) Companion Id and 4) IoT options. Whereas Okta will get majority of its income from Small Medium Enterprise (SMB) Workforce Id options which are deployed in cloud, Ping will get about 42% of its subscription income from buyer identification options. Each other differentiation is that Ping might be deployed on-prem to hybrid cloud environments and focuses on enterprises segments that always have advanced necessities.
Marquee buyer base; clients embody Netflix, Walmart (NYSE:WMT), Cisco (NASDAQ:CSCO), Bank of America, and so forth. Ping’s merchandise are extremely scalable and, with a raft of software program integrations into numerous enterprise purposes (roughly 1,500), make them perfect to handle probably the most demanding enterprise identification wants. Ping counts 60% of the Fortune 100 as clients, together with 12 of the 12 largest banks, 7 of the 10 largest well being plan suppliers, eight of the highest 10 prescription drugs and 5 of the 7 largest retailers. The next chart illustrates Ping’s buyer base. Supply: Ping Presentation Id Market and its TAM Id market consists of Id and Entry Market (IAM), Consumer Authentication, Privileged Entry Administration (PAM) and Id Governance and Administration (IGA) segments. In accordance with Gartner, the TAM for above-mentioned market segments is round $11 billion in 2019 and is anticipated to develop to round $16 billion by 2023. Nevertheless, the TAM estimates solely embody Workforce Id Market, however doesn’t embody Buyer Id Market. The next chart illustrates the scale of TAM in keeping with Gartner and solely consists of workforce IAM estimates. For APIs and IoT and Buyer Id Entry Administration (CIAM), TAM estimates are lacking from the Gartner estimates beneath. Ping is taken into account to be one of many leaders in CIAM market, and if each APIs and IoT segments are included, the TAM would increase to about $25 billion.
Supply: Writer primarily based on Gartner Information What does an IAM system do? Id and Entry Administration (IAM) – In accordance with Techtarget, the principle features of an IAM system are: How people are recognized in a system; how roles are recognized and assigned to people in a system; including, eradicating and updating people and their roles in a system; assigning ranges of entry to people or teams of people; and defending the delicate information inside the system and securing the system itself. Ping’s rivals in IAM house are Okta (centered on SMB clients to supply cloud primarily based Single Signal-On supply model for workforce), Broadcom (NASDAQ:AVGO) (through CA acquisition), IBM (NYSE:IBM), ForgeRock, OneLogin and RSA. What does an IGA system do? Id Governance and Administration – Id Governance and Administration techniques embody the next features: Compliance controls, lifecycle administration, password administration and information entry governance for customers and purposes. An IGA resolution will allow you to reply: Who has entry to which enterprise sources Who ought to have entry How is the granted entry getting used Gamers inside the IGA house embody SailPoint (NYSE:SAIL), Omada, Saviynt, OneIdentity, Broadcom and IBM. What does a PAM system do? Privileged Entry Administration (PAM) – A PAM system helps Safe, handle and monitor privileged accountsPlayers inside the PAM house embody Centrify, CyberArk (NASDAQ:CYBR), BeyondTrust, OneIdentity, Broadcom and Thycotic. To know PAM higher, please check with our write up on CyberArk. The next chart illustrates the overlapping options and performance of the assorted Id segments available in the market. Supply: Options Evaluate
Land-and-expand progress technique So as to hold its income rising, the corporate is targeted on including new logos, promoting extra to its current clients, launching new product choices and increasing internationally. So as to goal new clients, the corporate is hiring extra quota-carrying gross sales headcount, each domestically and internationally. At present, the corporate generates about 77.5% of its income from the US, with the remaining from overseas. Ping believes that it will possibly generate extra income from worldwide geographies, however it will want to speculate aggressively in quota-carrying headcount. We anticipate this to occur later down the road, when its free from Vista Fairness’s affect. The corporate is being pretty profitable in promoting extra merchandise to its current clients as evidenced by internet retention price of round 114%. Evaluating Ping Id Ping’s income model has much less visibility than different SaaS firms attributable to income recognition challenges of varied deployment models. Ping gives three deployment models – on-premise, hybrid and full-cloud, with overwhelming majority of income falling within the hybrid model. These completely different models make it difficult to forecast income with affordable certainty. On high of this, given the volatility in income attributable to CV-19 pandemic, Annual Recurring Income (ARR) is one of the best metric to measure Ping’s progress prospects. ARR mitigates the impact of length on contract income recognition has on income, along with on-premise and hybrid models. Whereas within the close to time period, many enterprises are solely buying what they want and are writing short-term contracts, we’re pretty assured enterprise will return to regular as the consequences of pandemic ease. F2Q20 pre-announcement Together with its secondary providing, Ping pre-announced F2Q20 outcomes that had been forward of consensus estimates. The corporate is scheduled to report outcomes on August 12th. We anticipate the corporate to problem steerage for F3Q20 that’s largely in line. As a reminder, the corporate pulled its annual steerage citing uncertainty surrounding the enterprise.
Valuation When valuing PING, we use EV/Gross sales as the first valuation metric. Provided that lots of the firms within the peer group are at present in transition to SaaS/Subscription income model or not totally worthwhile, EV/Gross sales makes the comparisons simpler. As well as, in a takeout situation, one of many main metric used to guage take-out costs nonetheless stays EV/Gross sales, as it’s simpler to check with historic multiples. PING is at present buying and selling at 9.1x EV/C2021 gross sales, effectively beneath the peer group common of 10.4x, regardless of rising revenues in step with the peer group common of about 18%. The next chart illustrates the valuation of the safety peer group. Supply: Writer from Reuters Information Dangers We don’t see Ping Id as overly low cost. It’s buying and selling at 9.1x on an EV/C2021 gross sales foundation. Within the occasion of a sell-off available in the market attributable to exterior components comparable to macroeconomic weak spot, the stock may transfer down greater than its friends. Any spending slowdown can result in a income and earnings miss, triggering a violent sell-off. Provided that Ping sells its merchandise in three completely different income models – on-premise, hybrid and subscription model – how income lands every quarter might be difficult for the corporate to forecast. If income from the subscription model will increase greater than forecast, reported income could possibly be decrease than anticipated, resulting in a stock sell-off. Provided that the corporate has 77.5% of its income within the US and the remaining from worldwide, any weak spot within the US may have devastating impression on its income and stock efficiency. Equally weak spot overseas may be difficult. Aggressive threat. Ping is trying to exchange legacy identification options within the enterprise, whereas additionally pursuing greenfield alternatives within the cloud. Ping faces intense competitors from the pure SaaS identification gamers comparable to Okta, OneLogin, and so forth. If legacy gamers with deep pockets comparable to Broadcom, IBM or Oracle (NYSE:ORCL) or Microsoft (NASDAQ:MSFT) purchase one of many newer gamers, we consider the competitors may materially change for all gamers concerned. Execution is all the time a significant threat for many firms. Ping’s quarters are often back-end loaded – i.e., a good portion of the enterprise closes over the last two to a few weeks of the quarter. Any deal slippage for any purpose over the last weeks of the quarter may impression income and earnings, resulting in a stock sell-off. Ping is aggressively hiring quota-carrying gross sales drive. If, for some purpose, the corporate hires personnel who’re unable to fulfill their gross sales quota, Ping’s income progress shall be impacted. Ping is aggressively constructing out capabilities to reinforce its synthetic intelligence and machine language providers, along with launching new product capabilities. If the adoption of providers is slower than anticipated, income and EPS could possibly be impacted Lastly, there may be different dangers which are much less prone to happen, in our view, which we may not be capable of at present anticipate. The best way to spend money on the stock Given the shares of Ping are moderately valued however not overly low cost, we might be accumulating shares opportunistically on weak spot.
Disclosure: I/we’ve got no positions in any stocks talked about, and no plans to provoke any positions inside the subsequent 72 hours. I wrote this text myself, and it expresses my very own opinions. I’m not receiving compensation for it (aside from from Searching for Alpha). I’ve no enterprise relationship with any firm whose stock is talked about on this article.