US growth stocks have largely been on a stellar run since the start of 2023. That certainly has been the case with Cellebrite DI (NASDAQ:CLBT), climbing by over 480% and reaching an all-time high in February. Yet since then, its performance has slipped a bit.
Its 2024 fourth-quarter earnings missed the mark, as did its subsequent 2025 first-quarter results. And while the miss was small, growth inventors tend to be quite unforgiving towards businesses trading at lofty valuations. So seeing a 36% pullback from its February highs isn’t a major surprise.
However, with the stock now trading at a cheaper price, could this be a buying opportunity?
Digging deeper
As a quick crash course, Cellebrite specialises in digital forensics. In the corporate world, this technology can be handy when investigating cybersecurity breaches. But for the most part, demand for Cellebrite’s technology actually comes from law enforcement agencies.
An estimated 90% of crime today has some sort of digital element. As such, requests to decrypt mobile phones and other electronic devices used to commit crimes are creating a significant backlog for investigators and prosecutors – a migraine-level problem that Cellebrite is helping solve.
Digging into the latest results, revenue growth continues to be explosive at 20% year-on-year, with annual recurring revenues climbing by 23% to $408m. And with a net retention rate of 121%, customers are clearly finding value in Cellebrite’s technology as they’re seemingly happy to ramp up spending each year.
Sadly, that just wasn’t enough to sate the appetite of growth investors who expected a little more top-line growth. And with management forecasting that sales might only grow by 17% for the full year of 2025, the stock endured a bit of a tumble.
A buying opportunity?
Even after its recent valuation hit, at a price-to-sales ratio of 8.8, Cellebrite shares can hardly be described as cheap. Yet projections from some analysts suggest that the premium might be worth paying. For example, JPMorgan currently has a share price target of $28 – around 70% higher than today’s price.
Such large 12-month projections should always be taken with a grain of salt. But Cellebrite’s target market is expected to grow at a near-15% annualised rate over the next five years. And given the company’s already the top dog in the sector, we might still be in the early days of Cellebrite’s growth story – even more so now that profits have started to materialise.
Having said that, there’s no denying the high risk here. Cellebrite’s technology is a powerful tool that can be easily abused if it gets into the wrong hands. This reputational risk is already being put to the test with reports of authoritarian regimes using the technology in human rights violations.
Management’s already tackling these issues with much stricter customer screening, disabling access when misuse is detected, as well as proactively suspending sales in over 60 countries. Nevertheless, ethical concerns will undoubtedly persist.
Despite this risk, I remain an optimist. The valuation’s still on the pricey side. But I think the premium might be worth paying, considering the opportunity that Cellebrite’s seeking to capitalise on. That’s why I’ve already used the recent stock price weakness to build a small position in my growth portfolio.
