As the eventful 2017 comes to a close, we believe this is the right time to make your investment plans for the upcoming year. Among the various industries, we prefer cybersecurity stocks due to their remarkable run on the bourse, so far this year. The ETFMG Prime Cyber Security ETF (HACK - Free Report) is up 18.7% in the year-to-date period.
A series of cyber attacks kept cybersecurity stocks hot throughout the year. Earlier in the year, there were two back-to-back ransomware attacks — WannaCry or WannaCrypt in May and Petya in June — followed by the massive data breach at Equifax (EFX - Free Report) in September. In addition to these, the disclosed data theft and ransom paid by Uber last month has further fueled the momentum.
Notably, these data breaches were a reality check, showing how cyber attacks can escalate companies’ market and operational risks as well as tarnish the brand image. Hence, the firms now understand the immediate need for stricter security measures, which, we believe, will compel companies to further increase spending on cyber security.
Per a recently-released report by Gartner, global enterprise security spending will reach $96.3 billion in 2018 — marking 8% growth from the 2017 expected level of $89 billion. Another market research firm, Markets and Markets in its July 2017 report stated that worldwide cybersecurity spending will likely reach $137.85 billion in 2017 and $231.94 billion by 2022.
Encouragingly, cybersecurity companies will be the ultimate gainers due to this elevated spending. Here, we have picked three stocks which have the potentials to make the most of this opportunity and retain their impressive share price momentum in 2018 as well.
FireEye Inc. (FEYE - Free Report) is a specialized provider of security platform against cyber-attacks to enterprises and governments. The company’s continued efforts toward bringing in new and advanced products have been attracting a wide range of customers.
Additionally, last year’s acquisition of iSIGHT Partners has strengthened the company’s capabilities by offering an intelligence-led security model for enterprises of any size that other security providers find difficult to match. This Zacks Rank #3 (Hold) company 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.
Check Point Software Technologies Ltd. (CHKP - Free Report) 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 users’ requirements.
Rapid adoption of Check Point’s data-center appliances and consistent enhancements in data-center product lines are anticipated to provide ample top-line support. The company’s focus on boosting mobile capabilities will enable it to tap brighter prospects. The stock carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Palo Alto Networks, Inc. (PANW - Free Report) enables firms, service providers and government bodies to impose tighter security measures through its network security platform. The company has been growing rapidly on the back of its innovative next-generation security platforms. Its security platforms have innovative traffic classification engines that help the company identify network traffic through 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 the company’s strategic acquisitions of LightCyber, Morta Security and Cyvera will continue to bolster revenues. These acquisitions helped this Zacks Rank #3 company expand the functionality of its enterprise security platform, in turn bringing in more and more customers.
In addition to the above, 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.
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.
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