Attention all shoppers: You think your payment card data is secreted away from thieves and scoundrels? Think again. In the wake of massive data breaches at Target (TGT), Home Depot (HD), Dairy Queen and Michaels Companies (MIK), consumer trust is plummeting and retailers are turning to cybersecurity firms for solutions
That creates a big opportunity for the right tech stocks.
The retail sector is littered with payment card wreckage right now. Home Depot just revealed a data breach that could have affected any customer that has used a payment card at any of its stores in the U.S. and Canada since April — potentially as many as 60 million cardholders, according to The New York Times. And Target’s hugely publicized data breach, which affected some 40 million cardholders, weighed heavily on earnings.
Reputational damage and lost customer trust could be even more damaging. A survey by American Consumer Credit Counseling earlier this year found 64% of American consumers do not trust retailers with their financial data.
The fact that data breaches are a pox on all retailers’ houses these days means there is a lot of focus on fielding tougher retail security solutions. And that creates an opportunity for tech stocks with sophisticated security products and services that can keep retail data safe.
Here are three great tech stocks poised to win from high-profile data breaches:
Great Tech Stocks – Palo Alto Networks (PANW)
Bad-news data breaches are good news for Palo Alto Networks (PANW).
This cybersecurity stock surged more than 10% on Wednesday after reporting a revenue beat and earnings meet. PANW posted revenue of $178.2 million in the quarter ended July 31 — well above $161.25 million analysts were expecting and 58% higher than the same quarter last year — that fed 11 cents per share in earnings.
Palo Alto’s focus is on network security — specifically, its platform is focused on helping large enterprises, government agencies and service providers secure their networks in a way that still supports the rollout of myriad new applications that run over those networks.
PANW’s firewall is the heart of its platform, and its intrusion detection software is top-shelf. Palo Alto also offers point solutions that address specific network security requirements from the datacenter out to the edge of the network — that includes security support for Bring Your Own Device, in which employees connect to the secured corporate or government network through their own smartphones, tablets or other devices.
Although PANW stock has gained 60% year-to-date, the sheer growth potential (earnings are expected to grow at more than 40% annually over the next five-year clip) makes this one of the best tech stocks to play the cybersecurity space.
Great Tech Stocks – FireEye (FEYE)
Negative data breach news and positive analyst opinion have had FireEye (FEYE) flying since the beginning of this week.
With a security platform that is based on virtualization technology, FireEye can protect enterprise and public-sector users from cyber threats in real time. This is a huge deal now because new generations of malicious attacks are increasingly impervious to signature-based malware or virus threats.
FireEye’s Threat Prevention Platform provides real-time, dynamic protection to counter a range of threats, as well as addressing the different stages of the so-called “attack lifecycle.” FEYE has more than 2,500 customers across 65 countries, including over 150 Fortune 500 companies. The lion’s share of its customer base is in the Americas.
FEYE stock also got a boost from Monday’s announcement that FireEye Threat Analytics Platform (TAP) is now available for Amazon (AMZN) Web Services customers. A cloud-based security analytics solution, TAP “applies FireEye Dynamic Threat Intelligence to event data produced by security devices, networks, systems and applications for attack detection, security monitoring and incident investigation support.”
The growth opportunity for FEYE is significant, though FireEye still has to turn that into profitability. FEYE currently is expected to operate in the red for the next couple of years, though this year’s estimated $2.14 per share loss would be a 28% improvement over last year, and that deficit is expected to shrink to $1.78 per share next year.
Still, while FEYE stock isn’t a traditional “value” play by any stretch of the imagination, shares are trading at a nearly 20% discount to where they were to start the year. Meanwhile, UBS has thrown its lot in, upgrading the stock from “neutral” to “buy.”
FEYE makes the most sense for growth-focused investors with a longer investment horizon.
Great Tech Stocks – Symantec (SYMC)
Symantec (SYMC) has long been a pillar of cybersecurity development on the enterprise, government, small-business and consumer spaces — the company’s popular Norton antivirus software is well-known by businesses and consumers alike.
But like all large information technology companies, Symantec is at a crossroads — recently shaking up its organizational structure and handing out pink slips to some 1,000 employees — CEO Steve Bennett among them. Interim CEO Michael Brown reportedly is a front-runner for the permanent job.
While the recent moves are unsettling, the latest reorganization’s focus on cybersecurity could be a winning play. Symantec is viewing consumer and enterprise security more holistically; the company also can benefit from launching more customized solutions that meet the specific needs of enterprise customers in security-cautious sectors like retail and healthcare. It’s easy to understand why Home Depot retained Symantec and FishNet Security to investigate the data breach.
SYMC is a much more established play, so the growth opportunity isn’t necessarily as exciting as what you could see in FEYE and PANW, but it still has much to gain from cybersecurity. Combine that with a price-to-earnings ratio of just 12 and even a decent dividend of 2.5%, and Symantec belongs on any list of tech stocks to capitalize on the cybersecurity boom.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.