Cybersecurity Stocks To Buy And Watch | Investor’s Business Daily

admin

You may think the time is right to move into cybersecurity stocks as geopolitical events unfold and acquisitions continue. X Look for updated guidance as earnings reports roll in.Heading into April-May earnings reports, Morgan Stanley analyst Hamza Fodderwala said: “Typically slower Q1 seasonality and currency headwinds may result in more limited raises to 2022 outlooks.”…

imageYou may think the time is right to move into cybersecurity stocks as geopolitical events unfold and acquisitions continue.

X Look for updated guidance as earnings reports roll in.Heading into April-May earnings reports, Morgan Stanley analyst Hamza Fodderwala said: “Typically slower Q1 seasonality and currency headwinds may result in more limited raises to 2022 outlooks.”

Check Point Software Technologies ( CHKP ) reported Q1 billings of $502 million, below consensus estimate of $532 million, sending CHKP stock down.

Shares in Fortinet ( FTNT ) popped on its first-quarter earnings report .But shares in Rapid7 ( RPD ) and Ping Identity ( PING ) tumbled on their earnings reports.

Meanwhile, Qualys ( QLYS ) has dropped off the IBD 50 roster of growth companies .

Industry consolidation continues.Private equity firm Thoma Bravo on April 11 acquired SailPoint Technology Holdings ( SAIL ) for $6.9 billion.Thoma Bravo also bought cybersecurity firms Proofpoint, Sophos and Barracuda.

Google-parent Alphabet ( GOOGL ) on March 7 said it’s acquiring cybersecurity firm Mandiant ( MNDT ) in an all-cash $5.4 billion deal.Upon the close of the acquisition, Mandiant will be part of Google’s cloud computing business.

Cybersecurity stocks got a lift in February as Russia’s invasion of Ukraine began.

Among the gainers: Palo Alto Networks ( PANW ).PANW stock holds a Relative Strength Rating of 94 out of a best possible 99.

Large contracts are boosting next-generation product revenue growth for PANW stock.

Meanwhile, CrowdStrike Holdings ( CRWD ) reported January-quarter profit and revenue that handily beat estimates.Fiscal 2023 guidance for CRWD stock came in well above expectations.And, CrowdStrike expects growth in a key financial metric .

How Big A Lift For Cybersecurity Stocks? Cybersecurity got investors’ attention after Russian President Vladimir Putin warned the U.S.and Europe not to interfere with what he described as a “special military operation” in the Ukraine.One concern is that cyberattacks could be expanded to Western targets after the U.S.

and Europe put severe economic sanctions on Russia.

But shares in Fortinet sold off after it halted new sales in Russia.Investors worried about the exposure of FTNT stock to Europe.

Meanwhile, the IBD Computer-Software Security group ranks No.67 out of 197 industry groups tracked.

A closely watched software benchmark, the iShares Expanded Tech-Software ETF ( IGV ), has contracted 24% in 2022.But security stocks have out-performed most software growth stocks.

Zscaler ( ZS ) stock fell on its earnings report as billings growth decelerated.SentinelOne ( S ), a rival of CrowdStrike, also reported fourth-quarter results that topped views amid a sizable acquisition of Attivo Networks .

Network Vulnerability Could Lift Stocks Another boost could come from Congress.”The significant Cyber bill requiring swift disclosure of all hacks and ransom payments was included in the 2022 Omnibus spending bill” said Needham analyst Alex Henderson in a report.

President Biden signed the spending bill into law on March 15.

“We believe the implications could be significant for demand of security products as budgets expand and increase in priority to avoid having to disclose an incident or be subject to potential penalties for non-compliance,” added Henderson.

Heading into 2022, analysts said some cybersecurity stocks could get a lift from the recently disclosed “Log4j” network vulnerability.

“We believe Log4j is driving incremental investments in areas like vulnerability management,” William Blair analyst Jonathan Ho said in a recent note to clients.

Cybersecurity spending worldwide climbed 13% in 2021 to $172 billion, estimated market research firm Gartner, accelerating from 8% growth in 2020.In both 2022 and 2023, Gartner forecasts 11% growth in cybersecurity spending.

According to a Goldman Sachs survey of chief information officers, security remains the top spending priority in 2022 followed by business intelligence/analytics, public cloud, SaaS applications and computer network switching.Further, Congress has finally passed legislation funding infrastructure projects, which is expected to include funding for federal, state and local cybersecurity infrastructure.

Ransomware remains a big threat , though fewer highly publicized incidents occurred in the back half of 2021.

The rise of cryptocurrency Bitcoin has been linked to a spike in ransomware attacks.In ransomware attacks, hackers take over computer systems, encrypt files and demand digital payment to restore access to critical data.

Cybersecurity Stocks With High Composite Ratings Cybersecurity stocks with Composite Ratings above 80 include CrowdStrike, Fortinet, Mimecast ( MIME ), Qualys ( QLYS ) and Palo Alto Networks.

The Composite Rating is a blend of the other five IBD stock ratings: the earnings per share or EPS Rating, Relative Price Strength Rating, Accumulation/Distribution Rating, Industry Group Relative Strength Rating and the SMR Rating.

The latter measures sales growth, profit margins and return on equity.The all-encompassing Composite Rating helps investors easily measure the quality of a stock’s fundamental and technical metrics.

No security stocks currently are members of the IBD Leaderboard.It’s IBD’s curated list of leading stocks that stand out on technical and fundamental metrics.

Hot Cybersecurity Startups Eye IPOs Private equity firms continue to eye cybersecurity stocks.

Permira in December agreed to buy Mimecast for $5.8 billion.Thoma Bravo in April 2021 agreed to buy Proofpoint in an all-cash $12.3 billion deal .

And initial public offerings are on the table.SentinelOne’s IPO raised $1.2 billion .SentinelOne is a rival of CrowdStrike .

Meanwhile, analysts say Netskope, Illumio and Menlo Security are among cloud security startups that could launch IPOs.Netskope in early July raised $300 million at a valuation of $7.5 billion.

Analysts say a new wave of startups seems to be taking share from industry incumbents.

“Illumio just completed a Series F round for $225 million of 100% primary capital led by Thoma Bravo, where Illumio now sports a $2.75 billion post-round valuation,” Needham analyst Alex Henderson said in a note.

Darktrace ( DARK ) launched its IPO on the London stock exchange in April.Darktrace utilizes self-learning artificial intelligence tools in security automation.

Further, consolidation may be coming in the cybersecurity industry.

Okta in early 2021 acquired privately held Auth0 in a $6.5 billion, all-stock deal .Also, Okta ( OKTA ) is expanding into new security markets to take on CyberArk Software ( CYBR ) and SailPoint.

Microsoft Stock A Big Player In Cybersecurity Also, Microsoft ( MSFT ) has moved into this space.

The software giant recently disclosed that its cybersecurity revenue tops $10 billion annually.With 400,000 customers, Microsoft’s computer security franchise is growing at more than 40%, the company said.

Microsoft in July 2021 acquired RiskIQ, a security threat management company.Bloomberg reported that Microsoft paid around $500 million.Microsoft also bought CloudKnox Security in July.

In addition, Microsoft is integrating more security tools into its cloud-based Office 365 software.As it expands cloud-based security services, Microsoft could pressure more industry incumbents, such as Okta, CrowdStrike, and Splunk ( SPLK ).

“Microsoft is clearly pitching itself as offering a full security suite, a competitive advantage as customers increasingly want a unified view of threats,” UBS analyst Karl Keirstead said in a recent note.

Alphabet ‘s ( GOOGL ) Google is vying to be another player.On Jan.4, Google acquired Siemplify, a security orchestration, automation and response provider, for around $500 million, reports said.

Cybersecurity Stocks: Relative Strength Ratings Also, one key IBD technical measure for cybersecurity stocks are Relative Strength Ratings .Further, it behooves an investor to know which cybersecurity stocks address ransomware, phishing or other kinds of cyberattacks.

Palo Alto Networks has spent more than $3 billion making 10 acquisitions over the past three years.

With roots in the “firewall” network security market, Palo Alto aims to build a broad cloud-based security platform.

Meanwhile, CrowdStrike uses machine learning and a specialized database to detect malware on laptops, mobile phones and other devices that access corporate networks.In addition, many software companies are using artificial intelligence to get a competitive edge .

In addition, Zscaler is the biggest provider of cloud-based web security gateways that inspect customers’ data traffic for malware.

SailPoint, an identity management software maker, is among companies that garner more than 10% of revenue from government agencies.

Coronavirus Outbreak Boosted Demand For Cloud Security Other cybersecurity firms with a sizable government business include Tenable Holdings ( TENB ), Rapid7 and CyberArk.

Tenable in 2021 acquired France-based Alsid, which focuses on identity access management.

Rapid7 and Qualys specialize in vulnerability management services.

Amid the rapid global spread of Covid-19, many companies instructed employees to work from home.That has increased demand for computer security products that support remote work.

The coronavirus emergency and shift to remote work has accelerated the growth of cloud-based network security.So the industry now has a new term for the infrastructure that supports distributed workers and branch offices.

It’s spelled SASE — pronounced “sassy” — and it stands for Secure Access Service Edge.

Cybersecurity Stocks: Remote Work Increases Amid Pandemic As remote workers access company data via the internet, many businesses are setting up virtual private networks, or VPNs.Some are buying laptops with preinstalled security software.

“We believe corporations are facing challenges in terms of VPN capacity, and protecting workers adequately with next-generation network and endpoint security offerings,” William Blair’s Ho said in a recent note.

He added that “intensifying email and phishing campaigns, identity access management, and control over software applications” are other security issues.

However, industries hard hit by the coronavirus pandemic will spend less on security software.They include airlines, hotels, retail and restaurants.

Meanwhile, one view is that mergers and acquisitions will pick up.

“The cloud has disrupted everything, which presents both threat and opportunity,” Jefferies analyst Brent Thill said in a recent note.”The cyber market is riper than ever for ongoing consolidation.

Many smaller vendors are attempting to solve the same problems, larger vendors are looking to create security suites, and financing rates are at all-time lows.”

In addition, while cybersecurity stocks often get a boost from well-publicized cyberattacks, the impact can be short-lived.

SD-WAN Technology Changes Security Needs Corporate America has hiked tech spending on security aiming to protect intellectual property as well as consumer privacy.Hackers continue to steal credit card data and intellectual property.

Spending on security technologies has evolved as companies shift business workloads to cloud computing service providers.

Amazon Web Services, part of Amazon.com ( AMZN ), is the biggest cloud services firm.Amazon looms as a potential rival as it builds more security tools into its cloud services.

Also, Fortinet competes with Palo Alto Networks and others in the firewall security market.Firewalls reside between private networks and the internet.They block unauthorized traffic and check web applications for malware.

As large companies shift to off-premise cloud computing services, one view is that firewall technology will play a lesser role.Fortinet has targeted software-defined wide area networks, or SD-WANs, an emerging computer networking technology.

Aiming to catch-up in SD-WAN technology, Palo Alto Networks acquired startup CloudGenix .

Cybersecurity Products Battle Ransomware, Phishing Cybersecurity stocks span a wide-range of products and services.

In addition, some security vendors are shifting to software-based subscription business models from selling hardware appliances.Among them, Proofpoint specializes in email and data-loss protection.

Meanwhile, hackers often aim to compromise networks by targeting employees or management who have administrative access.CyberArk manages privileged accounts.In addition, Okta provides identity management services.

To slow down hackers, more companies are focusing on internal security threats though a strategy known as Zero Trust .In addition, traditional security measures aim to keep the bad guys out of corporate networks.

Further, network firewalls focus on intruders from the public internet.

Zero Trust cybersecurity models focus on internal threats, such as hackers stealing someone’s security credentials.Security firms verify the identity of network users and limit access to applications.

CrowdStrike, Okta, Netskope and Proofpoint recently formed a Zero Trust alliance.Targeting Zero Trust security, Cisco Systems ( CSCO ) in 2018 acquired Duo Security for $2.35 billion.

Artificial Intelligence Changing Cybersecurity Market Also, many fast-growing cybersecurity firms are in the endpoint market.Their tools detect malware on laptops, mobile phones and other devices that access corporate networks.

Further, CrowdStrike’s initial public offering in June 2019 raised $612 million, one of the largest cybersecurity offerings.

CrowdStrike’s rivals include VMware ‘s ( VMW ) Carbon Black, Palo Alto and startup Cybereason.

The “Human Element” causes at least 75% of cyber breaches, according to a new study by Cowen Research and Boston Consulting Group.

Many companies have stepped up employee training to deter ransomware attacks and other threats.Cowen favors Cloudflare ( NET ), Fortinet, CrowdStrike and KnowBe4 ( KNBE ).

In addition, state-sponsored hackers and cybersecurity firms are both using artificial intelligence to get an edge.

Artificial intelligence should improve computer security tools by speeding up incident responses.It could help thwart email-delivered ransomware or swarming botnets that knock out access to websites.

An earlier version of this story incorrectly referenced a company known as FireEye.

That company last year was broken up, part of which merged with McAfee Enterprises ( MCFE ) to form privately held Trellix.The leftover portion is now known as Mandiant ( MDNT ).

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

YOU MAY ALSO LIKE

How This IBD Tool Simplifies The Search For Top Stocks

Find Compelling Growth Stocks With IBD’s Stock Of The Day

Get A Free Trial Of IBD Leaderboard

Best Growth Stocks To Buy And Watch: See Updates To IBD Stock Lists

Chart Reading For Beginners: Nvidia, Amazon, Pinterest Reveal This Key Investing Skill

Related news Stock Market Plunges, Erasing Prior Day’s Gains As Benchmark Yield Tops 3% 3:28 AM ET Indexes gave back most of the prior day’s big gains.The Nasdaq plunged 2.8%.

3:28 AM ET Indexes gave back most of the prior day’s big gains….

Fortinet Earnings, Revenue And Billings Top Estimates Dow Jones Futures Fall After Fed’s Powell Fuels Big Market Rally; Apple, Exxon Flash Buy Signals AI News: Artificial Intelligence Trends And Leading Stocks Is Google Stock A Buy? Internet Search, E-Commerce, Cloud Computing Drive Growth Cloud Computing: Find Top Cloud Stocks And Track Industry Trends Industry News And Stocks To Watch Facebook (FB) Stock Quotes, Company News And Chart Analysis FANG Stocks News & Quotes: Facebook, Amazon, Netflix, Google Today’s Spotlight Upcoming Investing Events Want to learn more about investing? Get access to free IBD events—online & in-person! Mother’s Day Sale Save over $60 on IBD Digital and ‘wow’ mom with your trading skills—just $8 for 8 weeks! All-New Moneyworks Lessons Ready to learn how to invest? Check out new lessons from our Moneyworks program.More News (© Gary Neill)

EV Battery Technology: Hunting For The Next Big Thing The Simple Ethos Behind Alkermes’ Research, According To Its CEO Yields are Soaring.

What Does that Mean for the Bank Stock Trade? Promoted Content By Direxion

TRADING CENTER INVESTING RESOURCES Take a Trial Today Get instant access to exclusive stock lists, expert market analysis and powerful tools with 2 months of IBD Digital for only $20!

IBD Videos Get market updates, educational videos, webinars, and stock analysis.

Get Started Learn how you can make more money with IBD’s investing tools, top-performing stock lists, and educational content..

Leave a Reply

Next Post

What Is ‘Dirty Soda'? Utah's Beloved Drink Is Bubbling Up Across the Country

At first glance, TikTok videos of milky swirls that plume into fizzy neon blue liquid might be mistaken for those dreamy satellite images from space.Instead of a galactic vision, however, the billows can be found doing their eddies in plastic cups filled with pebble ice; sometimes, they’re held by stars like Olivia Rodrigo . Called…

Subscribe US Now