Should you buy or sell IronNet shares? The stock spiked on rising subscription revenue

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 17, 2021
  • IronNet shares on Thursday rallied more than 28% to extend 2-day gains to over 112%.
  • The IRNT stock, however, pulled back more than 10% during the after-hours trading.
  • The company reported promising subscription revenue growth for Q2, sparking investor interest.

On Thursday, IronNet Inc. (NYSE:IRNT) shares surged 28% to extend post-earnings gains to 112%. The company announced its most recent quarterly results Tuesday after markets closed missing analyst expectations on revenue. 

However, IronNet’s fiscal Q2 results showed surging subscription revenue, sparking interest from investors. Its FQ2 revenue increased 23% to $6.1 million, with subscription revenue accounting for $5.8 million. 

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The company’s topline now stands at about $24.1 million on a trailing 12-month basis compared to $19.5 million in the prior period. In addition, its customer count has now soared to 51, up from 22 last year. The company issued full-year revenue guidance of $43 million to $45 million.

As of this writing, the IronNet stock price was up 298.84% this year following its post-earnings spike.

Should you bet on IronNet’s exciting growth prospects?

From an investment perspective, IronNet operates in one of the most exciting industries in the technology sector. The cybersecurity market space continues to gain the attention of investors amid the growth of the cloud computing market. 

More companies are embracing cloud-based services, which also expose them to cyber threats. As a result, cybersecurity companies have become more important as clients continue to queue up for their services. 

IronNet is a good example, with its recent surge in the number of customers promising a steady rise in subscription revenue. Therefore, although IronNet remains unprofitable, the company could turn a corner in the foreseeable future.

Source – TradingView

A pullback could be imminent as social media chatter fades

Technically, IronNet shares seem to have spiked sharply after announcing its GQ2 results. As a result, the stock price has surged to overbought conditions of the 14-day RSI, creating a perfect scenario for a pullback. 

Moreover, with the post-earnings social media chatter beginning to fade, the stock price could decline slightly as some investors move to take profits. Therefore, it could be best to target pullback profits at about $34.87 or lower at $27.33. 

On the other hand, if the stock price rises again following the after-hours pullback, it could find support at $47.65. The IRNT stock closed at $41.40 per share on Thursday.

Bottom line: could it be time to bet on the IRNT pullback?

In summary, although IronNet shares seem to be experiencing a significant bullish bias, the stock is substantially overvalued based on its price-book ratio of 6.40. 

Moreover, its exciting growth story will be realized down the line, meaning there could be time to cash in on the pullback and buy back when the price is lower.

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