Shares of Amazon.com, Inc (NASDAQ:AMZN) fell after its recently acquired gaming platform Twitch landed on the receiving end of the latest in a stream of hacking attacks. As the saying goes, though, one man’s trash is another man’s treasure; and what’s bad for AMZN is great for cybersecurity stocks.
We’re living in a world where no one would bat an eye at the mention of James Franco in the same sentence as “cybersecurity.” After Sony Corp (ADR) (NYSE:SNE) was incapacitated by hackers attempting to stop the theatrical release of Franco’s The Interview, another set of hackers exploited a security weakness in JPMorgan Chase & Co. (NYSE:JPM), suddenly cybersecurity is a big deal.
Now that companies can’t upgrade their cybersecurity infrastructure fast enough — and that’s an investing opportunity for most.
Here are the top three cybersecurity stocks to buy for growth.
3 Cybersecurity Stocks to Buy: FireEye Inc (FEYE)
Cybersecurity spending presently claims 10% of IT spending, but as the current climate of fear prompts companies to throw money toward next-gen cybersecurity infrastructure, companies like FireEye Inc (NASDAQ:FEYE) are ready to take advantage.
FEYE stock is up 39% from six months ago, and although it has negative EPS, analysts Daniel Ives and Gur Talpaz rank FEYE among the top cybersecurity firms poised for future growth, as FEYE in particular will grow from international expansion and cloud-based products.
As a growth stock, FEYE has seen massive spending, and EPS suffered because of it. However, as Ives noted:
“FireEye came out like a rocket and is now transitioning to develop the scale of a broader company. It will start to show profits in 18 to 24 months.”
Part of that growth will come from FEYE partnering with state governments, as FireEye CEO Dave DeWalt called on state leaders at the National Governors Association to increase cyberdefense priorities:
“FireEye has taken the lead in changing the way organizations worldwide strengthen their defense against a new breed of cybercriminals, and the NGA summit is an opportunity to reinforce what we’re doing to address the security challenges facing state governments. The data on state networks and the critical infrastructure supported by our states is attracting the attention of a growing number of today’s cybercriminals. Government officials, who are typically prepared to address natural disasters, are now recognizing that states need to be prepared for cyber attacks.”
3 Cybersecurity Stocks to Buy: Infoblox Inc
Infoblox Inc (NYSE:BLOX) is up more than 65% since hackers brought SNE to its knees, though that percentage pales in comparison to its earnings surprise percentages over the last four quarters, posting an 80% surprise on earnings in January. Analysts are increasingly bullish on BLOX stock, ramping up EPS estimates 7 cents over 90 days.
Revenue expectations are up roughly 17% over the next year due to BLOX killing off its products acquired before 2012, which means more product sales from customers forced to upgrade to Infoblox’s new products. That could make up as much as 20% of BLOX product revenue throughout the year.
Among its new services is Infoblox Cloud Network Automation, a private cloud with scalable network control. This service eliminates the need for manual processes, allowing IT departments a new flexibility in its efficiency to scale the private cloud network to the demands of company workloads. As Scott Fulton, Infoblox’s executive vice president of products, put it:
“We’re excited to help our customers accelerate their journeys into the private cloud. As they move through the life cycle of private cloud — from pilot to production to multiplatform — Infoblox Cloud Network Automation provides the rock-solid core network services they need to succeed.”
3 Cybersecurity Stocks to Buy: Cyberark Software Ltd
Cyberark Software Ltd (NASDAQ:CYBR) is up 90% since the SNE hack, and another 16% since Amazon’s Twitch hack. Wall Street expects a lot from CYBR stock, with some analysts expecting Cyberark’s revenue growth at over 40% to $145 million this year.
The bullishness on CYBR stock is due to CYBR consistently shocking on earnings, totally obliterating analyst estimates over its last two quarters by 1,900% and 320%, respectively. It’s no wonder EPS trends have increased from 7 cents to 28 cents in the last 90 days.
The highest target was set at $60 by Bank of America analyst Tal Liani, who estimates CyberArk’s enterprise value at 9.5 times its expected 2016 sales.
CYBR recently released version 9 of its Privileged Account Security Solution, which, as Tal Liani also noted, represents the largest boon for CyberArk as cybersecurity stocks take off. CyberArk’s chief marketing officer John Worral expressed a similar sentiment:
“Unsecured privileged accounts represent the largest security vulnerability government organizations face today. In the hands of an external attacker or malicious insider, privileged accounts allow attackers to take full control of an organization’s IT infrastructure, disable security controls, steal confidential information, commit fraud and disrupt operations. Enforcing the principle of least privilege outlined in the CDM program is an important step for federal agencies to take to harden their systems and protect against cyber attacks.”
While continued threats to business infrastructure make each of these cybersecurity stocks solid investments, they aren’t without risk when taken individually. If you want to buy in on cybersecurity stocks but crave diversification, consider PureFunds ISE Cyber Security ETF (NYSEARCA:HACK), up about 12% since the SNE hack, as a hedge against single stock volatility.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
More From InvestorPlace
- The Top 10 Mergers & Acquisitions of Q1 2015
- Outlook: Is a Change in Trend at Hand?
- An ETF You Can Buy and Hold Forever
