When most people think about personal security, they think about security against physical attacks and thefts. However, we like in a world where security goes beyond the immediate physical security and into our digital world.
Every time you turn on your computer, or hand your credit card information to someone, you are at risk. There are a lot of people out there who are constantly looking for ways to exploit computer usage and digital storage to steal your personal and work information.
Cybersecurity is a huge business, and as e-commerce grows, more people get online, and more data is stored in the cloud, demand for top cybersecurity services will only increase. Companies that already lead in the space will benefit the most, but the sector changes so rapidly, leadership with the cybersecurity sector could change at any time.
Cybersecurity is a great sector to invest, since demand is guaranteed to continue, and most likely increase… but you want to make sure you get diversified since it is such a rapidly evolving business.
Let’s take a look at five different plays on the sector that you can use as a starting point for gaining exposure into the sector.
Palo Alto Networks
Palo Alto Networks (PANW) has been a top performer over the last twelve months, with shares rising from around $115 to $179.50 over the last year, for a gain of 56 percent. The rise comes with the company showing strong earnings growth. Profit has risen by 87.8 percent per annum over the last five years, and looking ahead analysts forecast average annual earnings growth of 28.8 percent for the next five years. Despite the big gain over the last year, analysts remain bullish and expect more upside to PANW shares moving forward. PANW currently trades at $179.60, and analysts have a $192.31 average price target on the stock.
Proofpoint Inc. (PFPT) is a cybersecurity company that works with other companies to combat and prevent cyberattacks. The company helps prevent against attacks through email as well as mobile and social media. The company has been growing at a very rapid pace, with profits expected to rise by 56.6 percent next year, and by 21.5 percent per annum over the next five years. Over the last five years, the stock has appreciated in value from around $16 per share, to its current trading price of $113.40, for a gain of over 600 percent. The stock appears to be priced for perfection at the current time, with analysts setting an average price target of $114.53 on the stock. However, based on the company’s high growth rates, and the growing importance of cybersecurity, there is still plenty of upside as long as the sector does not run into any weakness, and Proofpoint it able to hit its future estimates. The company will next report earnings on May 8.
Cisco Systems (CSCO) is obviously not a pure cybersecurity play in the market. The company has a diversified array of communications products and services, but its cybersecurity segment is strong, and is definitely help drive the company’s bottom line. Cisco’s cybersecurity services help to protect network and data center security. It is also worth noting, that while Cisco’s cybersecurity business is only part of the company’s overall business, it remains bigger than industry heavyweights Palo Alto Networks (PANW) and Check Point Software (CHKP) – and its growing. Last quarter the company’s cybersecurity revenues were up 8 percent versus the same period last year, as the company has a clear advantage in the fact it has spent most of its life acquiring and servicing networking services and hardware, allowing it to expand its market with smaller customer acquisition expense versus the pure cybersecurity plays in the sector. The stock has trended steadily higher over the last year, and is currently trading just shy of its 52-week high at $44.65. Analysts who cover the stock have a $46.83 average price target on shares.
Symantec (SYMC) is working to keep you safe in multiple ways. The company offers LifeLock, which customers can use to keep their personal and credit information safe. With identity theft being the problem that it is, the company’s LifeLock services are sure to remain in demand. Symantec also manufactures antivirus software that users can use to protect them computers from malicious viruses. The company’s enterprise business works to protect companies in terms of their customer data and computer systems. Earnings have been a problem, with profits falling on average annual rate of 8.4 percent over the last five years, but that trend is reversing, and analysts forecast earnings growth of 37.3 percent this year, and 10.2 percent per annum over the next five years. The stock is in the lower end of its 52-week range at $27.01, while analysts have a $29.90 average price target on the stock.
First Trust NASDAQ Cybersecurity ETF
Since technology changes so rapidly, it is always safe to diversity across the sector, and even sub-sectors when possible, which makes the First Trust NASDAQ Cybersecurity ETF (CIBR) an attractive option. The exchange-traded fund holds the biggest names and the smaller names in the sector, so you are diversified and at the same time have exposure to smaller companies that could eventually shake up the industry and grow faster than more established companies. Among the fund’s top holdings are Cisco (CSCO), Palo Alto Networks (PANW) and VMware (VMW). CIBR has enjoyed big gains over the last six months, and should continue to reward investors as cybersecurity needs increase.