To The Moon

$Rubrik Inc.(RBRK)$

Rubrik, Inc. (NYSE: RBRK) is a cybersecurity firm specializing in data security solutions, including enterprise data protection, cloud data protection, and cyber recovery services.

Rubrik, based in California, offers data security technologies and serves over 6,100 customers worldwide. Their CEO and co-founder, Bipin Sinha, has been leading the company since 2014. Rubrik's product suite includes data protection, threat analytics, cyber recovery, and more. The company has already secured almost $1 billion in funding from firms like Lightspeed, Greylock Partners, and, of course, Microsoft.

As for its finances, Rubrik has $280 million in cash, $1.6 billion in liabilities, and a free cash flow of $16.9 million. The company’s revenue grew from nearly $600 million in 2022 to $627 million in 2023, which is impressive. However, when we look at operating income, it tells a different story. In 2022, it was $261 million, but by 2023, it had turned negative, at -$36 million. The company is burning through a lot of cash and is not yet profitable. In fact, its liabilities and debt are growing each year, which raises some concerns.

Earning Overview

In its fiscal fourth quarter ending January 31, 2025, Rubrik reported a loss of $0.18 per share, significantly narrower than the anticipated $0.39 loss. Revenue for the quarter reached $258.1 million, marking a 47% year-over-year increase and surpassing analyst expectations of $233.1 million. This growth was primarily driven by a 54% surge in subscription sales, totaling $243.7 million.

Fundamental Analysis

The company's Subscription Annual Recurring Revenue (ARR) experienced a 39% year-over-year increase, reaching $1.09 billion. Additionally, Rubrik reported having 2,246 customers with Subscription ARR exceeding $100,000, a 29% increase from the previous year.

For fiscal year 2026, Rubrik projects revenue between $1.145 billion and $1.161 billion, exceeding analysts' estimates of $1.106 billion. The company also forecasts Subscription ARR in the range of $1.35 billion to $1.36 billion.

Guidance

For fiscal year 2025, Rubrik (NYSE: RBRK) provided strong guidance, forecasting:

Revenue Growth: The company projects revenue for fiscal year 2025 to be between $1.145 billion and $1.161 billion, surpassing analysts' expectations of $1.106 billion. This represents significant revenue growth for the company, driven by increasing demand for its data protection and cybersecurity solutions.

Subscription ARR: Rubrik anticipates a continued upward trajectory in Subscription Annual Recurring Revenue (ARR), forecasting a range of $1.35 billion to $1.36 billion. This growth reflects the company's success in expanding its subscription-based offerings, which have become a major revenue driver.

Strong Market Position: Analysts remain optimistic about Rubrik’s ability to grow further, particularly in the cloud data protection and ransomware defense sectors, where it is well-positioned to benefit from increasing cybersecurity concerns across industries.

Free Cash Flow

Positive $75.2 million for Q4, contributing to $21.6 million for the full fiscal year. Rubrik has a free cash flow of only $16.9 million, which is relatively small given its scale and ambitions. The company needs to manage its cash burn effectively to avoid running into liquidity issues. High cash burn can put pressure on the company’s ability to fund its operations and invest in growth initiatives.

Risks and Challenges

In 2023, Rubrik’s liabilities grew from $1.1 billion to $1.5 billion, and its debt increased from $179 million to $287 million. The company’s net income went from $277 million in 2022 to a loss of $354 million in 2023. Despite having great products and a large customer base, there are significant financial risks.

Rubrik is currently not profitable. Despite strong revenue growth, the company has been burning cash, and its operating income turned negative in 2023. This raises concerns about its ability to scale and achieve profitability in the near future. If the company continues to lose money, it may need to rely on external funding to sustain its operations.

Rubrik’s total liabilities increased significantly in 2023, from $1.1 billion to $1.5 billion, and its total debt rose from $179 million to $287 million. The growing liabilities and debt may pose a risk, especially if the company fails to generate enough profits or free cash flow to manage these obligations.

The cybersecurity and cloud data protection industries are highly competitive. Rubrik faces competition from both established players like Veeam, Veritas, and Commvault, as well as emerging companies offering similar data security solutions. If Rubrik cannot maintain its competitive edge or differentiate itself sufficiently, it may struggle to maintain or grow its market share.

Rubrik's reliance on strategic partnerships (like its backing from Microsoft) is a strength but could also pose risks if those partnerships are altered or fail to deliver as expected. Any disruption to key relationships or integrations with other major tech players could negatively impact Rubrik’s business model.

Valuation

Analyst sentiment remains positive, with price targets raised to $80 and $75 by leading analysts, citing strong revenue and subscription growth. Despite the company's impressive growth metrics, some valuation analyses suggest caution. For instance, Rubrik's intrinsic value has been estimated at $42.40 per share, indicating the stock may be overvalued by approximately 42% compared to its current market price.

The initial price range for Rubrik’s IPO is set between $28 and $31 per share. However, there is a sentiment that the company may be overvalued at this price, given its financial situation. If the stock opens higher than expected (e.g., in the $40s), it could be considered overpriced, leading to potential market corrections if the company does not meet growth expectations.

Market sentiment

Optimistic Sentiment:

• Rubrik has strong backing from major investors, including Microsoft, and offers valuable data security solutions. The company has also shown impressive revenue growth, with substantial subscription-based revenue increases.

• Analysts have raised their price targets based on Rubrik’s market position in the cybersecurity and cloud data protection sectors, reflecting optimism about the company’s potential for future growth.

• With a solid customer base of over 6,000 clients globally and projections for robust revenue growth in 2025, there’s positive sentiment about its long-term prospects, especially given the increasing demand for cybersecurity solutions.

Cautious Sentiment:

• Despite the positive aspects, Rubrik is not yet profitable, and its financials show increasing liabilities and debt. This has led to some cautious perspectives from analysts who point out that the company is burning cash and may face challenges in achieving profitability in the short term.

• Concerns about its IPO valuation also exist, with some feeling that the stock may be overvalued at the proposed price range of $28-$31, potentially due to its financial challenges.

Conclusion

While the company’s backing by Microsoft and its growing customer base are impressive, the current financials raise red flags. So, even if the stock moves up double after the IPO, I think it’s a risky investment, especially at anything above $31. If it opens higher, I’m staying out.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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