VRNS Should I Buy
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Based on the data provided, Varonis Systems Inc (VRNS) is not a strong buy for a beginner investor with a long-term strategy and $50,000-$100,000 to invest. While there are some positive catalysts, the technical indicators, legal risks, and financial performance suggest caution. Holding the stock or waiting for further clarity is recommended.
The technical indicators are bearish. The MACD is negative and contracting, RSI is neutral at 46.252, and moving averages show a bearish trend (SMA_200 > SMA_20 > SMA_5). Key support and resistance levels indicate a pivot at 25.231, with resistance at 29.123 and support at 21.338. The stock is trading close to its pivot, suggesting limited upside in the short term.
Hedge funds are significantly increasing their positions in the stock, with a 170.88% increase in buying activity over the last quarter. Analysts have a generally positive long-term outlook on the company's SaaS business, expecting high-teens to 20% growth. Recent upgrades from analysts, such as DA Davidson upgrading to Buy with a $30 price target, reflect optimism.
The company is facing multiple securities class action lawsuits, which could negatively impact investor confidence and stock performance. Financial performance shows improvement in revenue and net income, but gross margin has declined, and the company remains unprofitable with negative EPS. Analysts have significantly lowered price targets, citing near-term headwinds such as the end-of-life for its on-premises product and uncertainty in ARR growth. Insider trading activity is neutral, offering no strong signal.
In Q4 2025, revenue increased by 9.37% YoY to $173.37M, and net income improved by 113.75% YoY to -$27.78M. EPS also improved to -0.24, up 100% YoY. However, gross margin dropped by 5.56% YoY to 78.91%. While there are signs of growth, the company remains unprofitable, and the declining gross margin is a concern.
Analysts are mixed but leaning positive for the long term. Most analysts maintain Buy ratings, with price targets ranging from $27 to $40. However, recent downgrades in price targets reflect near-term challenges, such as SaaS ARR guidance and the transition from on-premises products. Analysts believe the company has potential for strong SaaS growth but faces short-term headwinds.
