The novel coronavirus has accelerated a digital shift in just about every industry. Working from home, homeschooling, e-commerce, and telemedicine are just a few ways coronavirus has upended the way people interact. But with all of that online exposure comes a greater risk of data breaches, which is why many investors have started to look for cybersecurity stocks to buy to capitalize on the growing trend.
Just about every industry needs added protection right now as both customers and employees trust their networks with sensitive data. Data breaches can be costly, both to fix and to a company’s reputation, so investment in cybersecurity is likely to continue rising even as companies cut back amid the recession.
For some industries, the stakes are even higher. That’s something Associate Prof. Anjana Susarla, from the Accounting and Information Systems department at Michigan State University, pointed out in an email with InvestorPlace.
The two sectors that could be most affected [by cybercrime] are healthcare and transportation. The risks for healthcare and transportation are that of privacy since sensitive personal data can be hacked (about our driving habits and health etc). A recent study of the healthcare sector estimated that each hospital bed has 10-15 connected devices. This could increase the likelihood of ransomware attacks against hospital. A particularly pernicious source of attacks could be when hackers lock the keyboards of the target site until they get paid. This actually happened to the Hollywood Presbyterian hospital in 2016.
Prof. Susarla went on to say that the risks in the transportation industry are wide-ranging, from geolocation-related crimes to hacking autonomous vehicles:
Geo-tagged data collected from users makes it easy to sense where someone is, so that creates security challenges when malicious actors can gain sensitive location-based information. The contents of our refrigerators, the routes that we bike on everyday or drive to work can all be hacked by malicious actors. We could then see events such as hacking of autonomous cars, which will not only be harmful for the individual in question but also increase collisions and gridlock.
There are three cybersecurity stocks to buy if you’re looking for ways to play this trend.
Notably, CSCO stock isn’t the best of the cybersecurity stocks to buy if you’re looking for a pure play. The company is primarily an infrastructure firm. According to Cisco’s most recent quarterly report, its security business made up just 6% of its total revenue.
But the firm’s security offerings are growing quickly. Over the past year, the firm has seen a 12% increase in security revenue. A big part of that is Cisco’s ability to bundle services for its clients. So if Cisco is responsible for a hospital’s network, the company can up-sell with cybersecurity protection as well.
That’s particularly useful in today’s world where the digital shift arrived swiftly. Using an existing provider to build a safety net has a lot of appeal for companies trying to make big digital changes in a short amount of time.
California-based Fortinet is more of a pure play when it comes to cybersecurity stocks. The firm specializes in firewalls that protect customers’ networks from spyware and other cyber crime attacks. Many analysts believe that the shift toward cloud computing will render firewalls less useful in the future, but Fortinet has developed a unique position within the space.
Bank of American noted that Fortinet’s semiconductor technology is a key part of the firm’s value proposition.
Fortinet’s custom application-specific integrated circuit (ASIC) approach remains the key differentiator and enables the company to converge more functions, like SD-WAN, onto the firewall without inhibiting performance.
Plus, the outlook for FTNT stock looks promising through the end of the year. Fortinet is expected to deliver earnings growth of 11.2%, far better than the industry average of -4.6%. On top of that, sales growth is seen firmly in the double digits at 15.8%.
OKTA stock is probably the riskiest of the three on this list, in part because the firm has seen its share price skyrocket in the wake of the global pandemic. Any stock that finds itself trading more than 50% higher in the space of just three months should give investors pause. Of course, with the market still likely to suffer through more volatility in the months ahead, you could put OKTA on your watchlist and wait for another pullback, or you could buy it and stomach the ups and downs for long-term profits.
Okta has gained a lot of attention among cybersecurity stocks because of its unique business model. The firm takes an individualized approach to protecting companies’ cloud networks. While most cybersecurity firms protect the cloud network as a whole, Okta secures each individual employee. In doing that, compromising one employee doesn’t put the entire network at risk.
OKTA stock has risen rapidly after delivering better than expected earnings amid the global pandemic. While the firm’s share price in itself makes Okta a risky investment, it can also be seen as a defensive play should a second wave of coronavirus cases tank the economic recovery.
Working from home using cloud computing will likely continue coronavirus or not. A second wave only cements the value proposition for Okta.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.