Is it time to take profits in Barracuda Networks (CUDA)? Current cloud trends suggests doing so could be a mistake.

Although CUDA shares have rallied some 20% year to date, outperforming gains in both the Cyber Security ETF (HACK) and First Trust NASDAQ Cybersecurity ETF (CIBR), there is still tons of room left for Barracuda stock to run over the next 12 to 18 months. The Campbell, Calif.-based tech company, which is set to report second quarter fiscal 2018 earnings results Tuesday after the closing bell, has plenty of tailwinds to drive its growth.

For the three-month period that ended August, Barracuda is expected to report 17 cents per share on revenue of $93.33 million. This compares to the year-ago quarter when the company earned 21 cents per share on $87.93 million in revenue. For the full year, ending in March 2018, earnings are projected to be 76 cents per share, down from 83 cents a year ago, while full-year revenue of $377.8 million would rise 7% year over year.

The top- and bottom-line projections aren’t breathtaking, but that soon may change, given that corporations are now doubling down on their cloud purchases. And there are plenty of signs that the trend will continue. According to IDC, worldwide spending on public cloud services is expected to soar to more than $195 billion in the next couple of years, more than doubling the revenue of 2016.

“Cloud software will significantly outpace traditional software product delivery over the next five years, growing nearly three times faster than the software market as a whole and becoming the significant growth driver to all functional software markets,” said Benjamin McGrath, senior research analyst, SaaS and Business Models.

Meanwhile, Pacific Crest analyst Brent Bracelin forecasts public cloud spending, currently around $58 billion annually, will triple to $205 billion in the next three years. While that projected cloud growth should fuel revenues for traditional cloud powered like Amazon (AMZN) and Microsoft (MSFT), it’s poised to be a goldmine for Barracuda’s cloud-enabled solutions, which enjoyed a 9% rise in first-quarter revenue.

This is because, despite how explosive cloud growth projections might appear, there are tons of companies that are avoiding the cloud transition due to security concerns. And this creates an even greater advantage for Barracuda, which, unlike some of its competitors, offers a hybrid cloud solutions that allows it to optimize customers’ local hardware, while also helping customers to better address security threats, manage network performance, and protect and store their data.

That value proposition was evident in the Q1 as the company’s active subscribers exceeded 335,000, marking a 17% jump. Combined with a Q1 subscriber renewal rate of 90%, a 7% rise in gross billings and a 20% jump in billings for core products, Barracuda’s improving metrics support the year-to-date performance of the stock. On Tuesday analysts will want confirmation that the company can maintain its momentum.

Barracuda on Tuesday can demonstrate with its guidance for Q3 and full year just how confident it is in its ability to capture market share within a growing pie of cloud-based demand. And with the stock trading some 45% bellow its all-time high of around $46, Barracuda looks like a great catch.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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