Without a doubt, one of the biggest concerns of business, industry and the government is the need for information technology projecting cybersecurity. Once again, Wall Street is expecting growth of 5% to 10% over the next year, similar to 2018, with the European Union’s General Data Protection Regulation continuing to be the biggest tailwind for the segment.
This law on data protection and privacy for all individuals within the EU and the European Economic Area (the EU plus Iceland, Liechtenstein and Norway) also addresses the export of personal data outside these areas.
A new Jefferies report on cybersecurity points to cloud-based solutions as a solid growth area and noted this:
Strong Demand for Identity Solutions, with a shift towards cloud-based identity and access management or IAM. 75% use cloud-based, plan to shift to such, or use a mix of cloud and on-premise solutions (up from 66%). Multi-Factor Authentication (MFA) ranked highest in spending priority, followed by access management, Privileged access management (PAM), Identity Governance and Administration (IGA).
The report also said this when discussing network security:
In network security we see strong growth for cloud-based secure web gateways, cloud-based firewalls, and subscription services attached to Next Generation Firewall (NGFW) appliances. In endpoint, we see a continued trend towards next-generation solutions from both a customer and vendor perspective (including both traditional vendors and upstarts). Identity solutions also appear in high-demand, with the highest demand being for cloud-based solutions.
We screened the firm’s Buy-rated stocks and found the following four top picks for aggressive accounts.
Check Point Software Technologies
This stock has taken off recently but still offers solid upside. Check Point Software Technologies Ltd. (NASDAQ: CHKP) provides network security solutions, selling software, hardware and subscription services for IT security, with a focus of reducing complexity of security management. Its hardware is based on a software blade architecture that allows for multiple security functions to be run concurrently.
Check Point sells its solutions to service providers, small and medium-sized businesses, consumers and enterprises, including all the Fortune 100 companies. This long-time industry leader used to be a must-own stock for tech portfolios, and it has burst back into prominence.
The Jefferies price target for the shares is $140, but the Wall Street consensus target is just $118.33. The shares closed above that figure on Monday at $121.15.
Mimecast
This is a smaller and perhaps less-known company on which Jefferies is very positive. 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 and audit and reporting, and it enables administrators and security specialists to monitor and report attempted attacks. Mimecast also offers URL Protect, which tackles threats from emails containing malicious links.
Last year the company 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 price target of $55, while the posted consensus target was last seen at $52.93. The shares closed trading most recently at $47.82 apiece.
24/7 Wall St.Palo Alto Networks
This continues to be one of the most dominant players in the industry. Palo Alto Networks Inc. (NASDAQ: PANW) is helping to lead a new era in cybersecurity by protecting thousands of enterprise, government and service provider networks from cyber threats. Unlike fragmented legacy products, its security platform safely enables business operations and delivers protection based on what matters most in today’s dynamic computing environments: applications, users and content.
Palo Alto Networks security platform has new features that were introduced to help security professionals overcome the distractions and time spent on problems caused by the overwhelming volume of alerts and manual processes associated with operating many discrete security products and, instead, expand breach prevention capabilities and boost operational efficiency.
Jefferies notes that the company has refreshed its entire product line in early 2017 and 2018, and as such it has benefited from those activities. Nonetheless, the company is expanding into the carrier market, which could serve to offset any softness.
The $296 Jefferies price target is well above the $277.76 consensus price objective. The stock closed Monday’s trading at $242.54 per share.
24/7 Wall St.Splunk
This stock remains a top buy 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.
Jefferies notes that the company offers the de facto standard for security information and event management solutions. It also offers orchestration solutions for security operations, a new emerging category of products. Some 11% of respondents indicated using such orchestration solutions, and 42% indicated plans to employ them in the future.
Jefferies has put a $157 target on this stock. The consensus target across Wall Street is $152.71, and the stock ended trading on Monday at $127.91, down just over 5% on the day.
While the whirlwind around the top cybersecurity stocks has slowed dramatically from the pace of four or five years ago, the need still increases every year. These top stocks offer investors solid ways to play the sector in a multitude of areas.
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