Home Depot’s data breach could be even bigger than Target’s

Just when you thought it safe to swipe your swipe your credit card…

Once again, one of America's largest retailers – this time it is Home Depot (HD) – finds that hackers and data pirates have been stealing credit card information from its customers, right out from under its nose, and for a period spanning months. The breach was detected by KrebsOnSecurity's Brian Krebes, who now says that hack appears to have hit all 2,200 of Home Depot's stores in the US and Canada. (Stores in Mexico and Home Depot online do not appear to have been affected.)

The hacking has apparently been going on since April. This is embarrassing for Home Depot as the hack is due to the very same sort of malware that caused Target's (TGT) widely publicized 2013 data breach, (with the reported addition of some anti-US Russian propaganda in this case) and presumably, all major retailers took steps to protect themselves from the hack.

To be fair to Home Depot, it must be said that keeping the current technology secure is incredibly difficult. In fact, in a sad irony, Home Depot has been quicker than most retailers to dismiss the current system as fatally flawed. When it comes to adoption of the far more secure chip-and-pin technology, Home Depot has been leading the charge (sorry). The company will have switched over to chip-and-pin by the end of this year, well ahead of the industry's 2015 deadline. That will close the barn door on future hacks, but it won't bring back the horses that have already escaped.

Experts believe the hack could be even larger than Target's, a breach which has thusfar cost Target $146 million. Keep in mind, however, that even if Home Depot were to be stuck with a comparable bill, it would be a smaller piece of its $5.8 billion annual earnings than it is of Target's $1.51 annual earnings. Also, Home Depot has $2 billion in cash, so they can stand to write a few big checks if it comes to that.

Viewed in that light, HD stock's reaction to the news, (HD is down 1.2% today) which may initially appear to be an under-reaction, looks perfectly reasonable. Even so, there are still a lot of unknowns here, and HD stock has risen dramatically in just the last month. I wouldn't start buying HD on the dip until the dip brings the stock back into its more usual trading range, near $80 per share.

Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

Julian Close

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.

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