On Jul 29, credit card giant Capital One (COF - Free Report) announced that it had suffered a massive data breach back in March. The company said it learnt about the cyber attack on Jul 19. The attack involved theft of more than 100 million of Capital One’s customer records. Further, 140,000 Social Security numbers as well as 80,000 social security linked bank details were also stolen.
Analysts estimate that the company would now end up paying anything between $100 million and $500 million in fines for the incident. Over the past two years, we find that data breach incidents have been on the rise. Though unfortunate, incidents such as these buoy gains for cybersecurity companies due to an increased need for software to shield against malwares, ransom wares and the latest “lone wolf” cyber attack.
Meanwhile, the U.S. Department of Defense (DoD) has also revealed plans to up the ante when it comes to combating cyber attacks, mostly from America’s enemies. Under such circumstances, investors would do well to keep an eye trained on cybersecurity stocks.
U.S. DoD to Establish a Blockchain Cybersecurity Shield
Per the latest report on Jul 12, the DoD stated that it was planning to build a blockchain cybersecurity shield. The report, which is titled Digital Modernization Strategy, sheds light on various ways by which the regulatory body is looking to improve the country’s digital defense systems.
The department also plans to integrate cloud and quantum computing with AI. Further, distributed ledgers would be used to improve communication systems. Also, per a Decrypt report on Jul 29, DoD’s research wing DARPA has been experimenting on safeguarding messaging systems as well as process transactions.
Industry experts believe that blockchaintechnology will be used to improve the Digital Identity Management program. The department might issue digital tokens, which would be used in the verification as well as authentication of an agent’s identity.
Experts are also speculating that the DoD has been trying to create a code, which cannot be hacked and would therefore be used in securing defense databases. Further, in order to improvise the computing capability of the country, the DoD has been replacing its old hardware and cryptographic systems.
Cybersecurity ETFs on a Tear
Given such circumstances, indexes and ETFs tracking the performance of companies engaged in cybersecurity space have made big gains. Equity indices such as Nasdaq CTA Cybersecurity Index (NQCYBR) and ISE Cyber Security Index (HXR) have gained 20.8% and 19.8%, respectively, in the year-to-date period.
Over the same period, ETFs dedicated to cybersecurity, viz., First Trust NASDAQ Cybersecurity ETF (CIBR) and the ETFMG Prime Cyber Security ETF (HACK) added 31.6% and 22.4%, respectively.
4 Stocks to Watch For
The increasing need to secure cloud platforms, amid growing incidents of cyber-attacks and hacking, drives demand for cyber security software. Furthermore, in order to improve America’s computing prowess as well as to secure defense databases, the Department of Defense is working on creating a blockchain cybersecurity shield.
In this context, we have selected four stocks that are expected to gain from these factors. These stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Fortinet (FTNT - Free Report) is a provider of broad, integrated and automated cybersecurity solutions.
The company is based out of Sunnyvale, CA and has an expected earnings growth rate of 15.94%for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the past 60 days.
CyberArk Software Ltd. (CYBR - Free Report) is a provider software-based security solutions and services for organizations in order to help them safeguard and monitor their privileged accounts.
The company is based out of PetachTikva, Israel and has an expected earnings growth rate of 4.01%for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the past 60 days.
Qualys, Inc. (QLYS - Free Report) is a provider of cloud-based security and compliance solutions across the globe.
The company is based out of Foster City, CA and has an expected earnings growth rate of 10.29% for the current year.
FireEye, Inc. (FEYE - Free Report) is a specialized provider of a security platform against cyber-attacks to enterprises and governments.
The company is based out of Milpitas, CA and has an expected earnings growth rateof 83.34%for the current year. The Zacks Consensus Estimate for the current year has improved 6.7% over the past 60 days.
Fortinet, CyberArk, Qualys and FireEye have returned 79%, 138.4%, 84.3% and 14.3%, respectively over the year-to-date period. The following graph depicts the price performance of these stocks over the year-to-date timeframe.
Year-to-date Performances of Cybersecurity Stocks
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