Allot Communications (ALLT) Stock Forecast & Price Target

Allot Ltd demonstrated solid financial performance in 2QCY25, with total revenue increasing by 8.5% year-over-year to $24.1 million, driven significantly by a 73% year-over-year surge in SECaaS revenue, which constituted 26.6% of the overall revenue mix. The company's robust annual recurring revenue (ARR) from SECaaS soared 72.6% year-over-year to $25.2 million, signaling strong demand for its network security solutions and a favorable growth outlook, as reflected in the management's expectation of a 55%-60% increase in SECaaS revenue for CY25. Additionally, Allot's increased revenue guidance for the fiscal year, along with a 6.8% year-over-year rise in remaining performance obligations (RPO) to $63 million, further underscores a positive trajectory and enhanced visibility for future earnings.

Allot Ltd has experienced a significant decline in Product Revenue over the past four years, including an 18.7% year-over-year reduction to $7.6 million in the second quarter of fiscal year 2025. The company faces challenges in expanding its customer base with existing communication service providers (CSPs) and securing large deals, contributing to persistent revenue decline amid pressured capital expenditure (CapEx) budgets. Furthermore, the lengthy sales cycles for medium to large service providers may lead to a decrease in signed Security as a Service (SECaaS) deals, heightening the risk of quarterly results falling short of expectations and impacting its financial multiples negatively.