JFrog up 68% since IPO, Oppenheimer sees 21% upside

JFrog IPO / Photo: SO&CO event management

Oppenheimer provides an "Outperform" recommendation for the Israeli software management platform company.

Nearly one month after the Initial Public Offering (IPO) of JFrog (Nasdaq: FROG), Oppenheimer has begun covering the Israeli software management platform company with an "Outperform" recommendation and a price target of $90 per share, 21.6% above its current price and more than double its IPO price. Since JFrog's IPO on October 16, the company's share price has risen 68%, giving a market cap of $6.6 billion. Oppenheimer served as one of the underwriters in last month's IPO.

JFrog provides a solution that automatically and continually updates software without disrupting the user's experience. Oppenheimer analyst Ittai Kidron sees the company benefitting from the accelerated shift by organizations to digital operations and the growth in IT expenditure and thinks that the company will be a disruptive factor and can win a market share in the fast growing DevOps market. Although he is very positive about the company, he reminds investors about the technological risks in an uncertain and dynamically competitive macroeconomic landscape.

Kidron says that the DevOps market was worth $7.8 billion in 2019 and is expected to grow to $16.2 billion in 2024, when he estimates that JFrog would have captured a 2.6% market share.

He warns that the market is full of strong rivals including Microsoft, Sonatype and GitLab and competition will likely only intensify and become more difficult as these companies offer additional solutions.

Oppenheimer's price target is calculated according to enterprise value to sales ratio. The company's competitors are traded at multiples between 12.7 and 44.9 and Oppenheimer thinks that JFrog's shares should be trading in the upper range of this multiple due to its differentiation, strong execution and prospects.

Oppenheimer adds, "JFrog is well placed to present rapid paced growth while leveraging its distinctive technology in critical parts of the DevOps lifecycle, and benefitting from existing trends in the industry."

Kidron estimates that between 2019 and 2022, JFrog's annual revenue will grow at an annual rate of 33.8% due to its expanding customer base and adoption of additional technologies by existing customers. Oppenheimer predicts 2020 revenue of $147 million, up from $105 million in 2019 and 2021 revenue of $192 million. However, Oppenheimer does not see JFRog swinging to a GAAP net profit, only a non-GAAP net profit.

Published by Globes, Israel business news - en.globes.co.il - on October 12, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

JFrog IPO / Photo: SO&CO event management
JFrog IPO / Photo: SO&CO event management
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