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Cybersecurity Stocks To Buy: Microsoft Looms As Bigger

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Cybersecurity Stocks To Buy: Microsoft Looms As Bigger Threat Amid Shift To Cloud
By: Investor's Business Daily | April 9, 2021

• You may think the time is right to move into cybersecurity stocks, if you're reading this IBD investing primer.

Among new developments: consolidation may be coming in the cybersecurity industry. Okta (OKTA) in early March acquired privately held Auth0 in a $6.5 billion, all-stock deal. Also, Okta is expanding into new security markets vs. CyberArk Software (CYBR) and SailPoint Technologies (SAIL).

CrowdStrike Holdings (CRWD) in February bought cloud-based Humio for roughly $400 million. CrowdStrike expects upside from a cloud computing partnership with Amazon.

Also, Microsoft (MSFT) disclosed that its cybersecurity revenues top $10 billion annually. With 400,000 customers, Microsoft's computer security franchise is growing at more than 40%, the company said. Microsoft could pressure more industry incumbents as it expands cloud-based security services.

Palo Alto Networks (PANW), meanwhile, told analysts it's exploring a new "equity structure." One option, analysts say, would be creating a tracking stock to unlock the value of the company's cloud business. Provisionally called ClaiSec, Palo Alto's cloud unit has new products using artificial intelligence. A decision may not come for six months.

The big picture: the coronavirus outbreak and shift to remote work accelerated a shift to cybersecurity services delivered via cloud computing infrastructure. CrowdStrike and Zscaler (ZS) were among cloud-based security firms to get a boost.

Zscaler's fourth-quarter earnings, revenue and billings topped expectations. Even if economies normalize in 2021, analysts expect corporate spending on cloud-based security to remain a priority.

Cybersecurity stocks rallied in mid-December amid reports that Russian hackers accessed U.S. government computer networks via network management software provided by SolarWinds (SWI). Government agencies and companies exposed to the "Sunburst" cyberattack continue to assess damage.

The rally in cybersecurity stocks has eased. The big questions: how much of a spending boost on network monitoring/threat detection will result from the SolarWinds breach and what cybersecurity stocks stand to gain.

FireEye (FEYE), which garners some 15% of revenue from government customers, declined to quantify the impact of the Sunburst cyberattack on its services business when it reported fourth-quarter earnings.

CrowdStrike stock and Zscaler have dropped off the IBD Leaderboard. It's IBD's curated list of leading stocks that stand out on technical and fundamental metrics. CrowdStrike stock was featured as an IBD Stock of the Day.

Meanwhile, Fortinet (FTNT) ranks No. 42 in the IBD 50 roster of growth stocks.

Also, one key IBD technical measure for cybersecurity stocks are Relative Strength Ratings. According to IBD Stock Checkup, CrowdStrike holds a RS Rating of 86 out of a possible 99.

Also, CrowdStrike uses machine learning and a specialized database to detect malware on laptops, mobile phones and other devices that access corporate networks. In addition, many software companies are using artificial intelligence to get a competitive edge.

In addition, at its recent Fal.Con 2020 virtual user conference, CrowdStrike announced plans to expand from endpoint security into protecting cloud workloads.

Zscaler's Relative Strength Rating comes in at 79. In addition, Zscaler is the biggest provider of cloud-based web security gateways that inspect customers' data traffic for malware.

SailPoint, an identity management software maker, holds a Relative Strength Rating of 79. Sailpoint is among companies that garner more than 10% of revenue from government agencies.

* * *

Cloud Giants Amazon, Microsoft Loom As Threat

Spending on security technologies has evolved as companies shift business workloads to cloud computing service providers. Amazon Web Services, part of Amazon.com (AMZN), is the biggest cloud services firm. Amazon looms as a potential rival as it builds more security tools into its cloud services.

In addition, Microsoft is integrating more security tools into its cloud-based Office 365 software. Microsoft competes with cybersecurity firms such as Proofpoint (PFPT), Splunk (SPLK), CrowdStrike, Okta, and startup Netskope.

Also, Fortinet competes with Palo Alto Networks and others in the firewall security market. Firewalls reside between private networks and the internet. They block unauthorized traffic and check web applications for malware.

As large companies shift to off-premise cloud computing services, one view is that firewall technology will play a lesser role. Fortinet has targeted software-defined wide area networks, or SD-WANs, an emerging computer networking technology...

Read Full Story »»»


Information posted to this board is not meant to suggest any specific action, but to point out the technical signs that can help our readers make their own specific decisions. Caveat emptor!
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