Based in Herzliya, Israel, Cyren Ltd. (CYRN) is developing and marketing information security solutions to protect Web, e-mail, and mobile transactions. Its offerings include Cyber Intelligence Suite and CYREN EmailSecurity, and its customers include industry-leading companies such as Microsoft Corporation (MSFT) and Alphabet Inc.’s (GOOGL) Google. However, the penny stock has lost 50.9% in price over the past year and 21.1% over the past month to close yesterday’s trading session at $0.47.

CYRN announced on October 6 that it received written notification from the Nasdaq Capital Market that it needed to regain compliance with Nasdaq's minimum bid price requirement by April 4, 2022. In addition, the company has been selling shares and intends to use the proceeds for working capital purposes and the repayment of debt.

On September 20, CYRN completed a private offering of roughly 14 million of its ordinary shares. However, this transaction could lead to share dilution. So, CYRN’s near-term prospects look uncertain.

Click here to checkout our Cybersecurity Industry Report for 2021

Here’s what could shape CYRN’s performance in the near term:

Increased Demand for Cyren Inbox Security

Fleet Response chose CYRN’s Cyren Inbox Security (CIS) on October 13 as part of its defense-in-depth strategy to defend itself from phishing, business e-mail compromise, and other email-based threats. Over the past few months, Towpath Credit Union, Fluid Networks, and Sika Group also chose CIS to protect their operations from advanced phishing, fraud, and other e-mail threats.

Furthermore, on September 30, CYRN announced the expansion of CIS to include multiple language support that enables more effective communication of phishing threats to end-users delivered in their native language. The company also entered a distribution agreement with TD SYNNEX (SNX) to offer CIS throughout North America.

Weak Financials

For the second quarter, ended June 30, 2021, CYRN’s revenues decreased 17.1% year-over-year to $7.61 million. The company’s non-GAAP gross profit decreased 24.5% year-over-year to $4.55 million, while its non-GAAP gross margin for the quarter came in at 60%, versus 66% in the year-ago period. Its non-GAAP net loss increased 16% year-over-year to $3.85 million. Also, its non-GAAP loss per share remained flat at $0.06.

Poor Profitability

In terms of trailing-12-month EBITDA margin, CYRN’s negative 36.31% compares with the 14.70% industry average. Its trailing-12-month net income margin is negative compared to the 6.01% industry average. Moreover, its trailing-12-month ROCE, ROTC, and ROTA are negative compared to the 8.31%, 4.86%, and 3.59% respective industry averages.

POWR Ratings Don’t Indicate Enough Upside

CYRN has an overall C rating of C, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. Among these categories, CYRN has a C grade for Quality, in sync with its lower-than-industry profitability ratios.

The stock has a C grade for Momentum, consistent with its 21.1% loss over the past month and 23.4% decline over the past three months.

Also, CYRN has a D grade for Growth. This is justified because analysts expect its revenue to decline 15% for the quarter ended September 30, 2021, and 12.4% this year. Also, its EPS is expected to remain negative in fiscal 2021 and 2022.

Beyond what I have stated above, we have also given CYRN grades for Value, Stability, and Sentiment. Click here to get all CYRN’s ratings.

CYRN is ranked #14 of 28 stocks in the Software - Security industry.

Bottom Line

CYRN has a broad consumer base with more than 1.3 billion users. In addition, it has been making several developments with the help of CIS. However, it is currently trading below its 50-day and 200-day moving averages of $0.55 and $0.62, respectively, indicating a downtrend. Moreover, analysts expect its EPS to decline 20% year-over-year for the quarter ended September 30, 2021. So, we think it could be wise to wait for a better entry point in the stock.

How Does Cyren (CYRN) Stack Up Against its Peers?

While CYRN has an overall POWR Rating of C, one might want to consider investing in other  Software - Security industry stocks with an A (Strong Buy) or B (Buy) rating, such as Radware Ltd. (RDWR), Trend Micro Incorporated (TMICY), and NortonLifeLock Inc. (NLOK).

Click here to checkout our Cybersecurity Industry Report for 2021

CYRN shares fell $0.01 (-1.38%) in premarket trading Tuesday. Year-to-date, CYRN has declined -54.37%, versus a 20.78% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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