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4 Cybersecurity Stocks to Buy as Enterprise Spending Jumps

Chandrima Sanyal

Demand for cybersecurity solutions is expected to remain healthy in 2019 due to the increasing frequency and technologically advanced nature of cyber-attacks. These attacks are not only affecting companies but are also threatening the national security of some countries.

Per Absolute Markets Insights data, cyber-attacks can cost companies almost $5.2 trillion every year. According to a USA Today article, data breaches and cyber-attacks in 2018 affected billions of people — 765 million in April, May and June alone.

Moreover, the massive data breach by suspected Chinese hackers at hotel group Marriot International in December 2018 exposed the records of nearly 500 million customers.

Further, in October last year, Bloomberg Businessweek claimed that Chinese spy chips were present in numerous American corporate giants’ hardware, indicating the seriousness of data breach and sensitive information theft by hackers.

Additionally, in May 2018, two of the largest Canadian banks reported a major hacking of personal and financial information of nearly 90,000 of their customers. The following month, Ukraine reported that it successfully warded off another sophisticated cyber-attack against a chlorine distribution plant.

Recently, a research carried out by Check Point CHKP revealed that a massive distribution of the GandCrab ransomware has spread across Japan, Germany, Canada and Australia, among others, over the last two months, including an advanced version of the ransomware.

What is Driving Investments?

Enterprises are realizing the need for stricter security measures, which is pushing companies to further increase spending in this space. Ongoing digital transformation and proliferation of smart connected devices supported by artificial intelligence (AI) and its tools like machine learning (ML) are exposing vulnerabilities in security systems globally.

The growing incidents of AI and ML driven advanced security attacks or “smart attacks” have become a headwind for cybersecurity solution providers. As most enterprises transition to the cloud, traditional control panels are becoming insufficient to prevent and manage smart attacks.

In 2019 and beyond, cyber criminals are likely to use malicious chatbots to interact with potential victims and manipulate private information out of them. Current technologies like firewalls and host-based security tools are not strong enough to effectively combat threats of this kind. This is making it increasingly important for more stringent and advanced security like identity-based application security, and considerable amount is being spent on research and development in this area.

Enterprise Spending to Increase in 2019

With the global IT spending on “Security Technology” projected to exceed $124 billion in 2019 by Gartner, the industry’s prospects look promising from a near-term perspective, as it spells rise in sales of security products.

Recently, at the RSA Conference held at San Francisco, several interesting updates on the cybersecurity industry surfaced. For instance, it was projected that cybersecurity budgets can grow about 20% year over year in 2019, which is encouraging for the overall industry.

Moreover, per MarketsAndMarkets, the cybersecurity market is expected to see a CAGR of 10.2% between 2018 and 2023 to reach $248.26 billion.

Our Picks

Here, we have picked four cybersecurity stocks that have the potential to make the most of the increasing enterprise budget. These stocks either have a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Qualys, Inc. QLYS is headquartered in Redwood City, CA. The company’s partnerships with the likes of Amazon’s AMZN AWS Security Hub and IBM’s X-Force Red are expected to continue to be a major growth driver. This Zacks Rank #1 stock outpaced the Zacks Consensus Estimate for earnings in all the trailing four quarters, average being 19.2%.

Qualys, Inc. Price and Consensus

Qualys, Inc. Price and Consensus | Qualys, Inc. Quote

Fortinet, Inc. FTNT, headquartered in Sunnyvale, CA, is optimistic about its portfolio of integrated secured SD-WAN and 5G products; Security Fabric product suit; and its security processor unit, SPU, ASIC technology, and a high-performance E-series product announced recently. This Zacks Rank #1 stock surpassed the Zacks Consensus Estimate for earnings in all the trailing four quarters, average being 18.8%.

Fortinet, Inc. Price and Consensus

Fortinet, Inc. Price and Consensus | Fortinet, Inc. Quote

CyberArk Software Ltd. CYBR is headquartered in Petach Tikva, Israel. Enhanced functionality of Version 10 of the company’s core privileged access security solutions coupled with its new simplified pricing model is helping it drive customer acquisition. This Zacks Rank #2 stock beat the Zacks Consensus Estimate for earnings in all the trailing four quarters, average being 57.8%.

CyberArk Software Ltd. Price and Consensus

CyberArk Software Ltd. Price and Consensus | CyberArk Software Ltd. Quote

Palo Alto Networks, Inc. PANW is a Santa Clara, CA-based provider of network security solutions to enterprises, service providers and government entities worldwide. Recent talks over its acquisition of InfoSec company Demisto is expected to boost its information security capabilities further. This Zacks Rank #2 stock topped the Zacks Consensus Estimate for earnings in all the trailing four quarters, average being 8%.

Palo Alto Networks, Inc. Price and Consensus

Palo Alto Networks, Inc. Price and Consensus | Palo Alto Networks, Inc. Quote

Conclusion

Firms operating in the security industry are positioned to benefit immensely. This is because protection against spear phishing, credential-based attack, account takeover and ransomware attacks among others has become the need of the hour.

Moreover, the coming years might also see a rise in cyber warfare, given terrorist and cyber espionage groups’ widespread access to advanced technology. This bodes well for the cyber security software providers.

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