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3 Cybersecurity Stocks That May Give Double-Digit Returns in 2021

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Anirudha Bhagat
·5 min read
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The cybersecurity industry has been witnessing a bullish trend, of late, thanks to the SolarWinds SWI Orion software hack, which has made thousands of companies vulnerable to cyberattack.

The First Trust NASDAQ Cybersecurity ETF CIBR, which tracks the performance of companies engaged in the cybersecurity segment, has gained 14.9% this month so far. Moreover, the ETP has returned 47.7% this year so far, outperforming the broader market indices. The Dow Jones, Nasdaq, and the S&P 500 increased 6.6%, 43.4% and 15.5%, respectively year to date.

SolarWinds’ Orion Software Hack

In a Dec 14 SEC filing, SolarWinds said that its Orion network monitoring products, rolled out between March and June, fell prey to a highly-sophisticated, manual supply-chain attack. SolarWinds believes its Orion networking monitoring products were used to compromise the servers of nearly 18,000 of the company’s customers.

FireEye FEYE was the first to report on Dec 8 that highly sophisticated state-sponsored hackers stole its Red Team tools, which are used by the company’s officials for testing customer security.

It was later discovered that hackers used a backdoor in SolarWinds’ Orion network management software. Following that, a number of U.S. state agencies and organizations, including Microsoft MSFT and Intel INTC reported data breaches using SolarWinds’ software.

Cybersecurity Stocks to Gain

The silver lining to this episode has been increase in demand for security-related purchases by both companies and governments spurred by such a high-level security breach.

While the incident is a major blow to SolarWinds, it could bring cybersecurity stocks back into the limelight.

Notably, the financial well-being, brand image and reputation of enterprises and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.

Clearly, cases of data breaches drive the need to beef up cyber-safety measures, thereby fueling demand for the services offered by Internet-security companies.

Cybersecurity Market Promises Growth Ahead

Various independent research firms forecast stellar demand ahead for cybersecurity solutions. According to a Fortune Business Insights report, worldwide cybersecurity market size is set to reach $281.74 billion by 2027 from $112.01 billion in 2019, indicating compound annual growth rate of 12.6% during the period.

Furthermore, cybersecurity has become a matter of great importance over the past few months, as most of the employees across the country have taken to working from home amid the pandemic.

As vaccination programs will take several months to reach a major portion of the global population, these factors are likely to continue to benefit the cybersecurity companies in 2021. Let’s thus take a closer look at some notable cybersecurity stocks that could generate double-digit return next year.

Qualys QLYS offers cloud security and compliance solutions that enable organizations to identify security risks to their information technology infrastructures, thus helping protect their IT systems and applications from cyber-attacks.

Qualys is benefiting from surging demand for security and networking products amid the coronavirus crisis as a huge part of the global workforce is working remotely. Accelerated digital transformations by organizations are also fueling demand for the company’s cloud-based security solutions. As the remote-working trend and digital transformation initiatives by organizations are expected to continue next year, Qualys is well poised to benefit, given its strong portfolio of cloud-based security solutions.

The Zacks Consensus Estimate for 2020 earnings has moved 9.1% north to $2.87 per share over the past 60 days. For 2021, the consensus estimate has been revised 20 cents upward to $2.99 per share over the same time frame. Shares of this Zacks Rank #2 (Buy) company have been up 43.6% year to date.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fortinet FTNT is one of the dominant players in the Unified Threat Management (UTM) space, which is one of the fastest-evolving segments in the network security space.

The company’s ability to meld next-generation, cloud-based firewalls with SD-WAN allows it to grab an early lead in the SASE market. Its Opaq Networks buyout in July will act like a catalyst. Also, this company has been gaining from heightening cyber-attack risks that are propelling demand for its FortiMail platform.

Fortinet currently carries a Zacks Rank #3. The Zacks Consensus Estimate for its 2020 earnings has been revised upward by a couple of cents to $3.25 per share over the past 30 days. For 2021, earnings estimates have revised 1.4% higher to $3.57 over the same time frame. The stock has gained 38.6% in the year so far.

FireEye is currently focusing on cloud-based protection services. Earlier this year, it unveiled FireEye Messaging Security, which protects collaboration tools like Microsoft Teams and Slack. This solution is designed to reduce risks of cyber-infiltrations by scanning objects and links shared in the collaboration tool to identify zero-day malware and phishing links in real time.

In addition, FireEye has added the User and Entity Behavior Analytics (UEBA) tool to its Helix platform. The tool uses machine learning to set a baseline behavior and monitors any deviation from it. This helps the firm identify risky entities and protect organizations from security threats.

This Zacks Rank #3 stock has gained 39.5% in the year so far. The consensus estimate for the ongoing year and next year’s earnings per share have been stable at 29 cents and 34 cents, respectively over the past 60 days.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

Start Your Access to the New Zacks Top 10 Stocks >>


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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Intel Corporation (INTC) : Free Stock Analysis Report
 
SolarWinds Corp. (SWI) : Free Stock Analysis Report
 
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
 
Qualys, Inc. (QLYS) : Free Stock Analysis Report
 
FireEye, Inc. (FEYE) : Free Stock Analysis Report
 
First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports
 
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