JPMorgan recommends data security stock with AI momentum as top pick for the second half

Varonis Systems is gearing up for a comeback in the latter part of 2024 as data security demand increases, according to a report by JPMorgan analyst Brian Essex. Essex upgraded the stock to overweight from neutral and set a December 2025 price target of $54, up from $50, indicating roughly 29% upside potential from Thursday’s closing price. Varonis shares have fallen 6.7% so far this year as data security stocks experienced a general decline, presenting a promising buying opportunity for investors as we head into the second half of the year.

Essex believes that Varonis has an attractive outlook for the remainder of the year, with reasonable expectations, accelerating demand for Data Security, and potential tailwinds such as renewal catalysts in the third and fourth quarters, improved fundamentals from transition execution, and traction from recently introduced managed data detection and response software. Heading into FY25, there could also be AI tailwinds that emerge, according to the analyst. Data security demand is on the rise, particularly as ransomware attacks are expected to increase, with a breach predicted to occur every two seconds in 2031, up from every 11 seconds in 2021.

As companies face the need to protect their data from these attacks, especially with the growing adoption of generative artificial intelligence, Essex sees Varonis as well-positioned to capitalize on data security demand with its Best of Breed Data Security platform. Varonis delivered better-than-expected results in early May, reporting a loss of 3 cents per share on $114 million in revenue, surpassing analysts’ expectations of a loss of 9 cents per share on $113.7 million in revenue.

As demand for data security continues to rise and the threat of ransomware attacks looms larger, companies are increasingly looking for solutions to protect their valuable data. Varonis stands out as one of the best options in the data security space, with its comprehensive platform and strong positioning to meet the evolving needs of businesses in safeguarding their information. Essex’s optimistic outlook for Varonis reflects the potential for continued growth and success in the coming years as the company navigates the changing landscape of data security threats and opportunities.

Investors may want to consider adding Varonis to their portfolios as a potential opportunity for growth and exposure to the expanding data security market. With a promising outlook for the second half of 2024 and into 2025, Varonis could be well-positioned to capitalize on the increasing demand for advanced data protection solutions. Essex’s upgraded rating and price target indicate confidence in Varonis’ ability to deliver results and outperform expectations in the evolving data security landscape.