Caught up in the high multiple downdraft, the top cybersecurity stocks have been beaten down along with other high-beta momentum stocks of purveyors of burritos, specialty pharmaceuticals and electric cars. The one problem is that demand for cybersecurity software continues to go through the roof, and the demand for some of other companies’ products is somewhat more tepid.
With almost every corporation, government agency, municipality and every other conceivable organization looking to protect their security and data, the need is escalating, and so is the demand. We looked at the three of the top stocks, two of which posted either less than stellar earnings or gave disappointing guidance. The other one blew out numbers and upped guidance and was still taken to the woodshed.
With the stock just getting eviscerated, they may be starting to look awfully tempting to large companies with ancillary security business, or security companies that are looking to expand their product offerings. We screened the Merrill Lynch research universe for their current ratings on the top stocks that got hit the hardest.
This company had a red-hot IPO last year and has been mauled, down 30% in the past two weeks. CyberArk Software Ltd. (NASDAQ: CYBR) claims to be the only security company focused on eliminating the most advanced cyber threats, those that use insider privileges to attack the heart of the enterprise. The company proactively secures against cyber threats before attacks can escalate and do irreparable damage. Some 35% of the Fortune 100 and 17 of the world’s top 20 banks use the software to protect high-value information assets, infrastructure and applications.
CyberArk crushed earnings expectations recently and posted strong forward guidance. In fact, the company beat on top and bottom lines and provided above-consensus guidance for both revenue and earnings for the fourth quarter. While some, including CNBC’s Jim Cramer, have lamented the high price-to-earnings multiple, it should be noted that CyberArk is one of the few of the smaller top companies that actually makes money. It could be a solid fit for Checkpoint, which may have a need to add privileged account security solution to secure, manage and monitor privileged account access and activities.
Merrill Lynch recently downgraded the stock to a Neutral rating and lowered the price target to $48. The Thomson/First Call consensus price target is much higher at $63.475. Shares closed Tuesday at $40.50, down almost 10%.