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IronNet Stock Will Soon Grow Into Its Lofty Valuation

Cybersecurity is a major concern for our time. The rapid spread and proliferation of attacks like ransomware make it clear that this problem will only get worse with the advent of new malware. IronNet (NYSE:IRNT) is one of the top up-and-coming firms offering a unique solution to minimize cybersecurity threats. With its incredible cloud acceleration, merger and acquisition initiatives, and global expansion plans, IRNT stock has immense upside potential.

A person holding a tablet with a key lock hologram floating above it. Represents cybersecurity stocks.

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The company has recently posted solid second-quarter results, which are a testament to the quality of its business. Cloud-based subscription revenues have grown 65% on a year-over-year basis, proving the strength of its business model. Moreover, its annual recurring revenue came in at $24.1 million, more than $4 million higher than the same period last year.

IronNet went public in August via a special purpose acquisition company merger. Since then, it climbed as high as $47.50 and went as low as $9.36. IRNT stock currently trades slightly above its lowest price but still has investors concerned about its valuation.  The stock currently trades at around 20 times forward sales, which may seem a lot. However, with top-line growth estimates of over $100 million by 2023 and gross margins of over 70%, IRNT stock hardly seems overvalued.

IronNet Background

IronNet has been around since 2014 but has flown under the radar. It offers a robust suite of cybersecurity products that use cutting-edge technologies such as AI, behavioral analytics and machine learning. Though it may seem a relatively obscure name in its sector, its clients and partners are more well known. In a recent investor presentation, its management talked about their partners, which include several Fortune 500 companies.

IronNet is a provider of the mechanism for monitoring network traffic for potential cybersecurity threats. It uses AI to detect irregular patterns which are indicative of cyber threats. It makes use of something called “collective defense.” The concept is basically that companies such as IronNet can significantly improve their detection abilities by monitoring several companies simultaneously.

With collective defense, IronNet can create massive economies of scale and create a network effect that limits competition in its niche. Collective defense is implemented through “domes.” These domes are companies grouped according to particular sectors, led by one strategic customer, serving as the dome’s anchor.

Strong Leadership

According to the company website, “IronNet integrates deep tradecraft knowledge into its industry-leading products to solve the most challenging cyber problems facing the world today.” This is apparent in its remarkable top brass. The company’s co-CEO Keith Alexander has also served as the chief of the Central Security Service (CSS), which protects the critical information of the United States.

Later, he also led the U.S. Cyber Command. In his tenure, he was given the task of developing a plan of action and coordinating with other entities in defending the Department of Defense from cyber-attacks.

Furthermore, Bill Welch, the company’s co-CEO, is also a major asset to the company. He has been involved with multiple tech companies, including Duo Security and Cisco (NASDAQ:CSCO), to name a few. Hence, IronNet’s powerhouse team may be a major differentiating factor for the company over its competition.

Bottom Line on IRNT Stock

IronNet rounded off another stellar quarter with healthy top-line growth. It continues to perform incredibly well and its unique moat points to a massive upside ahead. It is led by a strong team of professionals who have had sizeable experience in the tech world. Hence, IRNT stock is an excellent long-term play in the fast-growing cybersecurity sector.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.