3 Cybersecurity Stocks That Will Rise During the Election Season

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cybersecurity stocks - 3 Cybersecurity Stocks That Will Rise During the Election Season

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Cybersecurity stocks the world over just got the best media coverage they could ever hope for. As Donald Trump and Hillary Clinton sparred at Hofstra University, millions tuned in, and subsequently, tuned out of “Monday Night Football.” Ratings for the popular sports broadcast plummeted, possibly to the lowest level in its history. There will never be another day when cybersecurity stocks take precedence over football. And there has never been a time when the issue has been more important.

3 Cybersecurity Stocks That Will Rise During the Election Season

That much was obvious as digital defense solutions were one of the weakest issues overall for both presidential candidates. Hillary Clinton gave the most polished answer, distinguishing cyber-attacks between independent threats and state-sponsored infiltration. Donald Trump, on the other hand, rambled on about a “400-pound” hacker, and his ten-year old son’s computer skills. Despite that, millions of voters will not forget Clinton’s email scandal, nor the recent cyber-attack against the Democratic National Committee.

The reality is that digital warfare was a time bomb that exploded years ago, and we’re just now catching on. No longer limited to identity theft for purely financial motivations, the online battlefield has extended to a litany of agendas. The exponential variables that exist today are a nightmare scenario for law enforcement agencies. At the same time, one industry’s misfortune is another one’s gain. Stable and well-capitalized cybersecurity stocks have tremendous tailwinds that they can wield to their advantage.

Better yet, the world now knows that digital warfare is a “big league” problem. Here are three cybersecurity stocks that should upload huge gains in the markets.

Cybersecurity Stocks to Buy: FireEye Inc (FEYE)

FEYE, cybersecurity stocks
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Source: Source: JYE Financial, unless otherwise indicated

Thanks to the hacking breach at Yahoo! Inc. (NASDAQ:YHOO), online threat intelligence and security solutions firm FireEye Inc (NASDAQ:FEYE) finally have some good news to celebrate.

Last week, Yahoo executives acknowledged that a “state-sponsored actor” stole identifying information from 500 million user accounts in 2014. As the company has a superior security system in place, it’s obvious that the broader threat is worse than realized. The implication is very positive for cybersecurity stocks, and FEYE is no exception.

Immediately following the announcement, FireEye stock jumped up 5%. From there, it has continued to inch forward in the markets. However, investors generally have not been bullish. Year-to-date, FEYE is down 30%. In comparison, YHOO shares are up 28%, despite their horrible admission. Commonly cited concerns are the negative profitability margins, as well as dubiously leading in revenue underperformance. Most importantly to investors, FireEye has been on a decidedly bearish track since its initial public offering.

All of these reservations are absolutely valid. Even if FEYE got up and running, it will likely be a choppy ride. That said, I think you have to treat cybersecurity stocks not just on individual merit, but on the direction of the industry. Companies like FireEye have a tendency to ride the news. From an investment point of view, cybersecurity is only going to increase as a globally important issue.

You can take that to the bank. And while I wouldn’t necessarily share the same level of confidence for FEYE specifically, it’s in a remarkably lucrative sector.

Cybersecurity Stocks to Buy: Fortinet Inc. (FTNT)

FTNT, cybersecurity stocks
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Source: Source: JYE Financial, unless otherwise indicated

It has been a good month for Fortinet Inc (NASDAQ:FTNT). The network security firm has won industry recognition for its superior breach-defense platform.

In addition, FTNT benefited from a 41% year-over-year bump in security appliance shipments in the second quarter. That led to a 25% market share in the quarter, which further solidified FTNT as the world leader in security appliance sales. Finally, the presidential debate was a remarkable showpiece for Fortinet and all cybersecurity stocks.

But just as digital threats are a constantly evolving risk factor, counteracting solutions must also demonstrate agility. This is where FTNT separates itself from several other cybersecurity stocks. Rather than focusing on a one-size-fits-all solution, Fortinet is positioning itself as an end-to-end services provider. As we’ve learned in recent times, cyber-attacks are not limited to a single motive or agenda. Thus, all digital applications — personal devices, networks and the cloud — are potential targets.

Financially, FTNT is a stable organization. Top-line sales growth is among the best in the business, and the company has no debt. On the other hand, profitability margins are very low, leading to less-than-desirable earnings growth. That clearly hasn’t bothered investors. Fortinet stock is up over 16% this year, and the trend looks strong. Unless something drastic were to occur, FTNT is setting itself up nicely for 2017.

As cybersecurity stocks continue to hit the news cycle, Fortinet is one you want to keep on your short list.

Cybersecurity Stocks to Buy: Check Point Software Technologies Ltd. (CHKP)

CHKP, cybersecurity stocks
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Source: Source: JYE Financial, unless otherwise indicated

When it comes to counterterrorism and threat intelligence, there is no better prepared country than Israel. In addition, Israel is blessed with a highly educated workforce, and its companies are efficiently operated.

These outside factors lend a significant boost of confidence towards the Tel Aviv-headquartered Check Point Software Technologies Ltd. (NASDAQ:CHKP). Among cybersecurity stocks, CHKP is on the fast track to be the most valuable in the industry.

That’s a bold statement, but let’s consider a few factors. First, Check Point chief Amnon Bar-Lev is a man that knows what he’s doing. Rising through the ranks of the Israeli Air Force, Mr. Bar-Lev has been involved in defense systems all throughout his career. Second, the financial stability of CHKP stock is unreal. Margins are through the roof, return on equity is well above industry standard at 20% and Check Point has no debt.

With all that being said, CHKP stock has seen better times. On a YTD basis, shares are down 5%. The slowdown in market value, however, should be viewed as a discounted buying opportunity. There aren’t many companies that have leadership like this, regardless of sector. That cybersecurity stocks are in a very positive limelight is icing on an already gratuitous cake.

If there’s any investment to consider within online network defense, CHKP is it.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2016/09/cybersecurity-stocks-election-feye-ftnt-chkp/.

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