The cybersecurity industry has been on a bullish trend, of late, thanks to the series of cyber attacks over the last few months. Among these, the recently reported cyber attack at Equifax Inc. (NYSE:EFX) is believed to be the most malicious, in which very sensitive personal data of approximately 143 million consumers was stolen from the company’s database.
Reportedly, nearly two-third of the adult U.S. population has been adversely affected due to this cyber attack. The data breach at the company is likely to have a lasting impact as criminals can use the stolen resources for opening new accounts, applying for credit cards or loans, buying insurance, renting an apartment or even make tax frauds.
While the world was still recuperating from this shocking attack, another massive cyber crime hit headlines last Monday (Sep 18), when Avast reported that its CCleaner security software has been infected with a malware, exposing over 2 million users. The sensitivity of this attack can be understood with the fact that the criminals tried to infect machines of technology and telecoms companies, including biggies like Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC), per a report by Cisco Systems.
Fresh Boost for Security Stocks
Based on the aforementioned back-to-back cyber crimes, cybersecurity stocks are on a roll now. ETFMG Prime Cyber Security ETF (NYSEARCA:HACK) has gained 2.3% in a month’s time. In 2017, so far, the ETF has returned 12.8%, outperforming the S&P 500 (GSPC) gain of 11.4%.
Apart from the above discussed attacks, the bullish momentum is well supported by the two back-to-back ransomware attacks — WannaCry or WannaCrypt in May and Petya in June — which created global havoc. In both cases, the malicious software reportedly seized control of computers and encrypted files with a password which only hackers have access to. After this, victims were asked to pay ransom in order to regain control of the systems. The hackers demanded ransom in bitcoin.
Investors Should Bank on this Opportunity
Though billions of dollars and data are lost due to cyber crime, there is a positive side to it. Cybersecurity companies stand to gain from data breaches as the chances of security-related purchase shoot up.
Furthermore, with rapid technological advancement, organizations are increasingly adopting the bring your own device (BYOD) policy to enhance employee productivity, with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.
We believe the urgency for stricter security measures will compel enterprises, as well as governments to increase spending on cyber security software. According to a Markets and Markets July 2017 report, worldwide cybersecurity spending will likely reach $137.85 billion this year and $231.94 billion by 2022.
Here we focus on three stocks that are anticipated to benefit from this elevated spending.
Hot Cybersecurity Stocks to Focus on for the Rest of 2017: FireEye Inc. (FEYE)
FireEye Inc. (NASDAQ:FEYE) is a specialized provider of a security platform against cyber-attacks to enterprises and governments. The company’s consistent efforts toward bringing in new and advanced products have been attracting a wide range of customers. Notably, FireEye’s Essentials product, which is a lower-cost and simpler version of the FireEye Global Threat Management platform, targets smaller and mid-market companies. This Zacks Rank #2 (Buy) company’s Cloud MVX and MVX Smart Grid offerings, a lower-cost intelligent threat detection solution, targets large enterprises as well as mid-market businesses. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Furthermore, the company’s move of shifting its business model to subscription-based cloud services from selling software is praiseworthy. Though shifting the business model to subscription-based services will generate lower revenues initially, but the same will be stable over the long run, as organizations usually renew subscriptions with the existing products or even with higher versions. Moreover, subscription-based services generate higher gross margins.
Additionally, last year’s acquisition of iSIGHT Partners strengthened the company’s capabilities by offering an intelligence-led security model for enterprises of any size that other security providers finds difficult to match. FireEye has also taken over Invotas, a firm specializing in improving response times following a cyber-attack. Its product, Security Orchestrator, is designed to compile information from a range of security products and automate responses when an incident occurs.
Hot Cybersecurity Stocks to Focus on for the Rest of 2017: Palo Alto Networks, Inc. (PANW)
Palo Alto Networks, Inc. (NYSE:PANW) allows firms, service providers and government bodies to impose tighter security measures through its network security platform. The company is growing rapidly on the back of its innovative next-generation security platforms. Its security platforms have innovative traffic classification engine that helps it identify network traffic by application, user and content. Palo Alto’s security platforms simplify security infrastructure for organizations by eliminating the need for multiple, stand-alone security appliances, and software products. This reduces the total cost of ownership, thereby giving the organization a competitive edge.
Also, we believe its strategic acquisitions with the likes of LightCyber, Morta Security and Cyvera will continue to bolster revenues. These acquisitions helped this Zacks Rank #3 (Hold) company expand the functionality of its enterprise security platform, in turn bringing in more and more customers.
Additionally, Palo Alto has made strategic partnerships with the likes of VMware and Aruba Networks to expedite growth. These strategic partnerships bring in customers for Palo Alto, thus boosting its top line.
Hot Cybersecurity Stocks to Focus on for the Rest of 2017: Check Point Software Technologies Ltd. (CHKP)
Check Point Software Technologies Ltd. (NASDAQ:CHKP) has evolved into a well-known provider of information technology (IT) security solutions across the world. The heightening security threats and potential hacking attacks led the company to turn to Software Blade architecture in 2009 from an appliance-led model. The company’s blade architecture is becoming increasingly popular as it enables customers to choose from an archive of software blades and customize the solution to suit the user’s requirements.
Rapid adoption of Check Point’s data center appliances and consistent enhancements in data center product lines are likely to provide ample top-line support. The company’s focus on boosting mobile capabilities will enable it to tap brighter prospects.
Considering the above discussed factors, it makes sense to invest in this hot industry group as cybersecurity players are likely to witness sturdy growth in the near term.
Can Hackers Put Money INTO Your Portfolio?
Earlier this month, credit bureau Equifax announced a massive data breach affecting 2 out of every 3 Americans. The cybersecurity industry is expanding quickly in response to this and similar events. But some stocks are better investments than others.
Zacks has just released Cybersecurity! An Investor’s Guide to help Zacks.com readers make the most of the $170 billion per year investment opportunity created by hackers and other threats. It reveals 4 stocks worth looking into right away.