Just a few short years ago, cybersecurity was the hottest of red-hot tech sectors and we covered the top companies seemingly all the time. Scorching hot initial public offerings had lots of investors, especially the fast-money type, going all in here. Then suddenly, things slowed to a crawl. The hot IPOs crashed, and the huge earnings growth slowed. One thing has remained: the need for cybersecurity is just as big now, if not bigger than the recent past.
In an exhaustive 200-page report from Jefferies, the analysts stress that while growth has tapered some, the critical need remains intact. High-profile hacking at the government and corporate levels has stayed in the headlines, so investors remain aware that the overall need has not diminished. The analysts noted this in the report:
We believe that information technology security will remain a growth market for years to come, even if it’s not at the rate experienced in the recent past when corporations less educated on the topic were compelled to obtain as much IT security technology as feasible given the risk to not only business, but also reputation.
Jefferies has four cybersecurity stocks rated Buy, and all make sense for investors with aggressive growth portfolios looking to add a top player in this arena.
Check Point Software Technologies
This remains one of the top tech stocks to buy on Wall Street for a security presence. Check Point Software Technologies Ltd. (NASDAQ: CHKP) is one of the best in helping customers protect against advanced persistent threats (APTs). The company is considered a worldwide leader in securing the internet, providing customers with uncompromised protection against all types of threats, reduces security complexity and lowering the total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology.
The company’s revenue growth rate has slowed somewhat compared to years of massive quarter-over-quarter gains. However, many on Wall Street think that Check Point should see year-over-year accelerating growth in product licenses, particularly as the security firewall refresh appears to be in full-growth mode.
The Jefferies price target for the stock is a mammoth $118. The Wall Street consensus is $97.89, but shares closed Thursday at $102.84.
This is a smaller and perhaps less known company that Jefferies is very positive on. Mimecast Ltd. (NASDAQ: MIME) provides cloud security and risk management services for corporate information and email. The company offers Mimecast Email Security services, including targeted threat protection that extends traditional gateway security to protect organizations against targeted attacks, audit and reporting, and enables administrators and security specialists to monitor and report attempted attacks. It also offers URL Protect, which tackles threats from emails containing malicious links.
The company recently introduced the latest capability of its Targeted Threat Protection service, Internal Email Protect, the first-to-market cloud-based security service providing threat capabilities for internally generated email. Internal Email Protect allows customers to detect and remediate security threats that originate from their users’ email accounts.
Jefferies has a whopping $30 price target, while the consensus target is $27.39. The shares closed most recently at $19.96.
This stock also remains one of the top Buys on Wall Street. Splunk Inc. (NASDAQ: SPLK) provides a software platform for collecting, storing, indexing, searching and analyzing machine generated data, such as log files and configuration files, which are prevalent in every type of IT system, device and application.
Splunk technology is potentially applicable and disruptive in several market segments, including IT operations, security and compliance, and business intelligence. These market segments are collectively worth $28 billion today.
The company reported outstanding fourth-quarter results, beating expectations for all metrics including sales, margins, free cash flow and billings. While the guidance was below expectations, many think the first quarter will be the bottom, and shares are an outstanding buy at current levels.
The $81 Jefferies price target compares with the consensus price objective of $72.03. The shares closed at $60.48.
While not a pure-play security stock, this is a big potential winner in the overall sector. Varonis Systems Inc. (NASDAQ: VRNS) is a leading provider of software solutions that protect data from insider threats and cyberattacks.
Through an innovative software platform, Varonis allows organizations to analyze, secure, manage and migrate their volumes of unstructured data. Varonis specializes in file and email systems that store valuable spreadsheets, word processing documents, presentations, audio and video files, emails and text. This rapidly growing data often contains an enterprise’s financial information, product plans, strategic initiatives, intellectual property and confidential employee, customer or patient records.
IT and business personnel deploy Varonis software for a variety of use cases, including data security, governance and compliance, user behavior analytics, archiving, search, and file synchronization and sharing.
The Jefferies price target is $37. The consensus target is $34.22, and shares closed Thursday at $28.45.
While the whirlwind around the top stocks in the industry has really slowed from the 2014 and 2015 pace, the need is increasing every year. These top companies offer investors solid ways to play the sector in a multitude of areas.