Tufin Software (NYSE: TUFN) Stock is Ready for Multiple Expansion

Enterprise network security firm Tufin Software Technologies NYSE: TUFN stock has awakened fueled by better than expected top-line guidance. The growing need for enterprise security stemming from the SolarWinds NYSE: SWI hack has spurred tailwinds for cybersecurity stocks including CrowdStrike NASDAQ: CRWD, Palo Alto Networks NYSE: PANW and FireEye NASDAQ: FEYE. Tufin is a niche player in the enterprise security policy management, compliance, and automation segment of the cybersecurity playing field. It’s software services encompass public, private cloud and physical networks spanning all business segments. It’s distribution strategy includes over 140 channel partners with regional sales teams. It’s edge is the flexibility of vendor and cloud agnostic solutions and first-to-market with security policy automation and superior topology mapping of networks. While the Company has been operating for over a decade, the need for (boring) security policy management is a growth driver in the current risk environment. Imagine administering over 1,500 network policy changes per week by hand versus having it automated. This was a situation that led to a seven figure contract win with a large global bank and raised revenue guidance moving forward. The cost savings in labor and bolstering of efficiency is a no brainer. Prudent investors seeking a niche play in enterprise cybersecurity can watch for opportunistic pullbacks in shares of Tufin Software.

Q3 2020 Earnings Release

On Nov. 12, 2020, Tufin released its third-quarter earnings report for the quarter ending in September 2020. The Company saw an earnings-per-share (EPS) loss of (-$0.03), excluding non-recurring items, versus consensus analyst estimates for a loss of (-$0.16), beating by $0.13. Revenues were flat at $25.6 million versus consensus analyst estimates for $23.59 million. The Company issued flat Q4 revenue guidance between $24 million to $29 million versus analyst estimates for $27.93 million.   

Raised Guidance

On Jan. 14, 2021, Tufin announced a surprise guidance raise for Q4 2020 expected between $30.50 to $31.1 million versus the $27.93 consensus estimates. This caused shares to gap over 20% through $19.00 in the afterhours. The Company also named Raymond Brancato as Chief Revenue Officer. Brancato comes from AnyVision, a private artificial intelligence company and previously from CA Technologies. Tufin CEO Ruvi Kitov states, “The need for network security policy management has never been greater, and the market opportunity for the Tufin Orchestration Suite is large and growing. We are pleased to deliver revenues above expectations for the final quarter of an unprecedentedly challenging year. Our revenue in the fourth quarter continued to be driven by the accelerating trends of automation and the shift towards Zero-Trust.”

Pandemic Triggered Tailwinds

Since the SolarWinds SUPERNOVA hack, the awareness for strong security policy administration is a boon for Tufin. The freeze on corporate discretionary spending may have hurt Tufin early in the pandemic, but the need for network change to accommodate work from home trends opens up the need to secure more of the attack surface against hackers and cybercriminals. The need to accomplish more tasks with smaller budgets fall right into the automation solutions that Tufin provides with its “Secure” line of products: SecureChange, SecureApp and SecureCloud. The Company’s Q4 2020 full earnings release is expected on Feb. 12, 2021. Since shares have accelerated so quickly to the upside, it’s prudent not to chase and be aware of the potential for a sell-the-new reaction if forward guidance for Q1 is not raised. Prudent investors can looking for opportunistic pullback levels pre or post earnings release depending on the price action.

 TUFN Opportunistic Pullback Levels

Using the rifle charts on the monthly and weekly time frames enables a more broader view of the price action playing field for TUFN stock. The monthly rifle chart is still materializing but indicates a powerful stochastic mini pup thrusting up through the 20-band with the 5-period moving average (MA) at $10.64 still attempting to crossover the 15-period MA into an uptrend. The weekly rifle chart shows the explosive volume on the earnings reaction that gapped and peaked shares just above the $19.00 Fibonacci (fib) level as the weekly stochastic completes a full oscillation rising from the 10-band to the 90 band. The weekly market structure low (MSL) triggered above $7.70. If the weekly stochastic peaks and slips back down towards the 80-band, prudent investors can watch for opportunistic pullback levels at the $16.66 fib, $15.62 fib, $14.39 fib, $13.30 fib, and the $12.53 fib. The upside trajectories range from the $21.64 fib up to the $30.31 fib level.