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Here’s why Cellebrite is the hottest title this week

Broader markets are now firmly in bearish territory, and Russia is poised to default on its external debt obligations. Much of the market has seen a substantial correction, and investors’ pain is all too apparent.

Now is, as Warren Buffett will agree, the time to go bargain hunting. In sync, we’re celebrating Cellebrite this week (CLBT), a leading name in its niche and offering a potentially interesting entry point.

Why Cellebrite?

Cellebrite is on a mission to speed justice, save lives and safeguard the privacy of communities around the world. From the crime scene to the courtroom, Cellebrite offers a suite of solutions through its software platform for the complete investigative workflow.

The company provides license and subscription based solutions and has amassed compelling growth metrics. Each year, more than 500,000 legally sanctioned investigations use the company’s solutions. It has more than 7,000 customers who seek Cellebrite to address the quantity and complexity of digital evidence, the inefficiency of current data management, and the growing need for selective extraction and analysis.

To mitigate challenges, Cellebrite offers fast, automated data collection and review, forensic digital evidence management, and forensic analytics using multi-data AI and ingestion engines. Cellebrite estimates the size of its addressable market at $13.2 billion, assuming a fully digital transformation of investigative work.

The company already has more than 100 North American federal accounts, 15 US Cabinet executive departments, 27 EU national police and all 50 US states in its customer base. Additionally, 68 of the Fortune 100 companies already use Cellebrite’s services. Major private sector clients include seven of the ten largest pharmaceutical companies; eight of the ten largest US software companies; and eight of the top ten US commercial banks.

Cellebrite aims to maintain this growth trajectory with increased lifetime value (LTV) through flexible subscription and consumption models, licensing growth, adding new customers and adopting enterprise-grade solutions.

Strong finances

As the COVID-19 pandemic has impacted a number of industries, Cellebrite has proven its resilience. Revenue grew from $171.8 million in 2019 to $246.2 million in 2021. For 2022, the company expects revenue to be between $285 million and $300 million. He expects the gross margin to be between 80% and 82% for 2022.

Additionally, between 2020 and 2021, Cellebrite has seen 11x annual recurring revenue (ARR) growth from European National Police and 6x growth from US State Police ARR. The ARR is estimated between $250 and $265 million in 2022.

Market players are looking for Cellebrite

It is therefore not surprising that the various stakeholders remain enthusiastic about the stock. Needham analyst Mike Cikos has a buy rating on Cellebrite with a price target of $6. Cowen & Co’s Shaul Eyal also has a Buy rating alongside a price target of $13 which implies a huge upside potential of 146.68%.

Overall, the street has a Strong Buy Consensus rating on Cellebrite based on four unanimous buys. Cellebrite’s average price target of $9.67 implies an upside potential of 83.5%.

At the same time, hedge funds increased their equity holdings by 1.3 million shares in the last quarter, indicating a very positive sentiment signal for hedge funds. Additionally, Cathie Wood’s ARK Investment Management initiated a position in Cellebrite for approximately $2.6 million.

TipRanks data also shows that our users are positive on Cellebrite and their number of purchase transactions is almost 1.5 times the number of sales on Cellebrite. Additionally, the number of portfolios on TipRanks that hold Cellebrite has increased by 8.2% in the last thirty days alone.

Closing remark

Cellebrite has carved out an attractive niche in digital intelligence, and the company could have a long growth trajectory ahead of it.

The stock is down nearly 50% in the past year, but has already risen 20.6% in the past month. With a market capitalization of just under $1 billion and a P/E ratio of 18.2, the stock may offer an attractive entry point given the rout in broader markets.

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