Fortinet FTNT has been one of the outstanding performers in the cyber-security space this year. The stock has appreciated 61% in the year-to-date period, outperforming the industry's 19.1% rally, primarily driven by strong quarterly results.
Notably, this Zacks Rank #2 (Buy) company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average positive surprise being 17.4%. Fortinet also recorded significant top- and bottom-line year-over-year growth in these quarters.
The company is benefiting from strength in overall product suite of Security Fabric, which provides unified security across the entire digital attack surface. The digital transformation and security refresh cycle across most industries are tailwinds. Growing adoption of its Software-Define Wide Area Network (SD-WAN) solutions is also a positive.
We note that Fortinet’s experience in the security space and mission-critical solutions is helping it maintain and grow its market share in the booming cyber security space.
What’s Driving Security Stocks?
Frequent cyber-attacks have increased the demand for cyber security software. Protection against spear phishing, credential-based attack, account takeover and ransomware attacks among others is the need of the hour.
Moreover, although artificial intelligence (AI) is considered to be a key tool for countering cyber-attacks, its growing application across major sectors has made it vulnerable. Per cyber-security firm Symantec SYMC, in 2019 and beyond, attackers are going to exploit AI systems and use the technology to aid assaults.
Encouragingly, cybersecurity companies will be the ultimate gainers due to the elevated spending on security by government and other enterprises. Notably, for cybersecurity-related activities in 2019, the U.S. government has allocated $15 billion (up $583.4 million from 2018). It is anticipated that spending on cybersecurity will continue to outpace other tech verticals next year.
A new survey report by Thales eSecurity points out that given the bigger threats and more sophisticated attacks, U.S. banks and other financial firms are likely to increase their cybersecurity spending in 2019.
Furthermore, per Gartner, global cyber security spending is expected to grow 8.7% to $124 billion in 2019 due to higher spending on General Data Protection Regulation (GDPR) and other privacy legislation.
Other Cyber Security Players to Watch Out For
Fortinet faces competition from numerous big and small players in the security application market. The competing firms are delivering prompt and advanced technologies to suit customer requirements and expediting product introduction in order to grow.
We have picked four stocks that have a Zacks Rank #1 (Strong Buy) or #2 (Buy) and Growth Score of A or B as the combination offers the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our first choice is Qualys, Inc. QLYS, a leader in the worldwide security and vulnerability management market. The company provides enterprises instant visibility of their IT assets and global security practices through its QualysGuard Cloud Platform. The company’s new cloud-based security and compliance stack is getting positive reception from new and existing customers.
The stock sports a Zacks Rank #1 and has a Growth Score of B. The company delivered average four-quarter positive earnings surprise of 38.3%. The Zacks Consensus Estimate for its 2019 earnings has increased 3.4% to $1.85 over the past 60 days.
Qualys, Inc. Price and EPS Surprise
Qualys, Inc. Price and EPS Surprise | Qualys, Inc. Quote
CyberArk SoftwareCYBR is another security stock, which seems to be a lucrative option at the moment. The company is benefiting from growing adoption of its solutions, which is helping it win deals in new as well as add-on businesses. Increasing demand for privileged access security on the back of digital transformation and cloud migration strategies is a key growth driver.
This Zacks #2 Ranked company has a Growth Score of A and delivered average four-quarter positive earnings surprise of 48.5%. The Zacks Consensus Estimate for 2019 earnings has increased 9.3% to $1.88 over the past 60 days.
CyberArk Software Ltd. Price and EPS Surprise
CyberArk Software Ltd. Price and EPS Surprise | CyberArk Software Ltd. Quote
The next stock that makes it to our list is Radware RDWR. The company is working toward expanding its market share in application delivery controllers. The company’s focus on availability of security solutions for the private, hybrid, and public cloud to address their customer needs is a positive. Moreover, OEM partnership with Cisco, Check Point and Nokia bodes well for the company.
This Zacks Rank #2 stock has a Growth Score of A and delivered average four-quarter positive earnings surprise of 23.5%. The Zacks Consensus Estimate for 2019 earnings has increased 12.7% to 62 cents over the past 60 days.
Radware Ltd. Price and EPS Surprise
Radware Ltd. Price and EPS Surprise | Radware Ltd. Quote
Another pick is FireEye FEYE, which is benefiting from its diversified product portfolio and increasing clientele. The company’s turnaround efforts, which include shifting the business model to a subscription-based one, are apparently paying off. FireEye is gaining customer accounts and increasing penetration of existing customers, which is driving revenue growth.
The stock carries a Zacks Rank #2 and has a Growth Score of B. The company delivered average four-quarter positive earnings surprise of 125%. The Zacks Consensus Estimate for its 2019 earnings has increased 12% to 19 cents over the past 60 days.
FireEye, Inc. Price and EPS Surprise
FireEye, Inc. Price and EPS Surprise | FireEye, Inc. Quote
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>
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Fortinet, Inc. (FTNT) : Free Stock Analysis Report
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