As was widely rumored last May when Apple announced its 7 for 1 stock split, the company will be joining the Dow Jones Industrial Average next week by replacing AT&T in the vaunted stock market index. However, Apple joins fellow telecomm giant Verizon in the DJIA, retaining the tech sector’s relative proportion within the index.

By now it has become apparent to even the Apple-haters that the company is clearly one of the top consumer products manufacturing companies in the world, thereby meriting its inclusion in this globally followed gauge of U.S. economic health. And healthy Apple is, defying its critics with record profits for the most recent quarter, along with a major product launch scheduled for next month.

In fact, Apple is set to introduce its long awaited Apple Watch on April 24^th in the United States, Australia, Canada, China, France, Germany, Hong Kong, Japan and the United Kingdom. However, customers in those countries can begin previewing the watch on April 10^th and pre-order their style of choice, with prices ranging from a low of $349 for the Sport edition, all the way up to $10,000 (and more) for a gold-plated version.

Let’s face it; Apple has become so good at pumping up demand for its new products it is doubtless that initial sales for the watch will be brisk; the real question is how well it sells in the months that follow once the hobbyists and collectors have placed their orders. While it certainly won’t become as ubiquitous as the iPhone, we think it will become more popular than most analysts are predicting.

One reason is the growing size of smartphones, which makes it inconvenient to retrieve one from your pocket each time it vibrates to let you know you have a new message. It will be far easier to take a quick glance at your wrist, especially if you are sitting down, to see who is trying to reach you than to wrestle an iPhone 6 Plus out of your pocket.

Naturally, the Apple Watch will be able to do a lot more than tell you who is trying to call you. It will also be able to summon a taxi, check your flight status, monitor biometrics, order a pizza, and give you up-to-date scores on your favorite sports teams. Of course, it won’t be any good for writing documents are reading spreadsheets, but who really wants to do all that anyway?

NASDAQ Composite Index:                                                                        

Friday, March 6 = 4,927.37                                                     

Trailing 12 months = + 14.4%                                        

Trailing 7 Days = – 0.7%                                       

Trailing 4 Weeks = + 0.7%

Next Wave Portfolio Update—Varonis Systems

By Rob DeFrancesco

Shares of Varonis Systems (VRNS) have settled down a bit after their recent bout of volatility. Within four months of the low being put in at $17.50 in October, the stock more than doubled to the February high of $38.48, mainly propelled by the general run-up in the overall security sector. Many momentum investors these days are scrambling to find the best ways to play ramping demand in enterprise security, so stocks across the sector are getting bid up in the process.

Of course, after a quick 119% rally, expectations were rather high going into last month’s release of fourth quarter earnings. The results were perfectly fine, but the company issued 2015 revenue guidance that the momentum crowd deemed not quite good enough, sending the stock tumbling 18.8% in one session.

There is nothing wrong with Varonis’ fundamentals, as revenue last year rose 36% to $101.3 million. In the fourth quarter, per-share earnings of six cents topped the consensus estimate by two cents, and revenue advanced 31%, driven by 37% growth in the EMEA region.

In the latest quarter, the company added 363 new customers, up from 285 in the year-ago quarter and 223 adds in Q3. Varonis ended the year with more than 3,300 customers (950 were brought on in 2014). New customers in Q4 accounted for 64% of license and first-year maintenance revenue, vs. 36% for existing customers. The maintenance renewal rate remains above 90%.

With the company’s average selling price for 2014 at $58,000 (not a major dollar commitment for an enterprise customer), Varonis’ strategy going forward is to boost the volume of deals by selling into an increasingly larger customer base. About 42% of Varonis’ customers have bought more than one of its solutions, up from 39% at the end of 2013.

For Q1, Varonis sees revenue of $22.9 million to $23.4 million, vs. the consensus estimate of $22.7 million. For 2015, revenue guidance of $129.7 million to $132.8 million (indicating growth of 28% to 31%) came in above the consensus of $129.5 million.

Following the earnings report, a Needham analyst pointed out that Varonis’ revenue outlook for this year is strong even with a roughly 3% currency headwind (international business accounts for 46% of total revenue); excluding the currency pressure, top-line growth would be 31% to 34%.

Varonis sits at the intersection of network security, infrastructure management and Big Data analytics, so it’s well positioned. A positive takeaway from the Q4 earnings conference call: Management said Varonis is experiencing a higher level of inquiries from customers because of escalated cybersecurity concerns. The demand is there and expected to remain strong for some time because organizations have been under-investing in their security infrastructure for years.

With Varonis shares recently trading at $30.25, the market cap of $747 million is 5.7 times the 2015 consensus revenue estimate of $131.7 million and 4.4 times the 2016 consensus of $168.1 million. I look for the stock to continue to consolidate around current levels over the near term.

Varonis Systems remains a ‘Buy’ in the Next Wave Portfolio up to $30.