Varonis Systems' (VRNS) AI story remains undervalued as it advances to capture market opportunity amid rising demand from clients to secure their data and AI stacks, Wedbush Securities said in a note Wednesday.

The Q1 beat was a "good step in the right direction" for the company, which remains a prime acquisition candidate given its robust market position, analysts wrote.

The company is prioritizing AI-driven automation with the launch of cybersecurity platform Varonis Atlas after the acquisition of AllTrue.ai amid the need for end-to-end visibility and management of agent models, according to the note.

Wedbush reiterated its outperform rating on the stock and boosted its price target to $37 per share from $35.

Shares of Varonis were up more than 5% in Wednesday trading.

Price: 26.77, Change: +1.33, Percent Change: +5.23