The cyber security market is growing at a brisk pace and is expected to continue its upward trajectory for at least a few more years. Despite the strong growth prospects, cyber security stocks like FireEye (FEYE, Financial) have performed terribly over the last few months.
High beta stocks have been punished in the current market and FireEye is no exception to it. Given the company’s growth prospects, I think FireEye is a great speculative play after the recent crash. While FireEye has been struggling, its peer Palo Alto Networks (PANW, Financial) has managed to withstand the test of the market and has performed very nicely over the last few months. Investors can benefit from betting on these two companies as the cyber security market is booming.
Booming sector
In 2015, technologies like Internet of Things, 3D printing, and hoverboards were three evolving technologies that did not live up to expectations. In 2016, the hype appears to be positioned around virtual reality and drones, as it is still an infant sector. At present, we cannot comment on its growth rate, as it is very early to observe if any of these technologies has the potential to be a long-term champion, but there is still one intact and robust sector that is not going anywhere: cyber security.
As per Juniper Research, cyber-crime will cost companies over $2 trillion by 2019. Juniper also projects the typical cost of a data breach to outstrip $150 million.
The price of a data breach is important. Target (TGT) suffered $300 million in outlays from the time when hackers cracked their way into the company’s network in 2013. The price may even escalate higher as the company expects a class action suit from investors and financial institutions.
When a breach is made public, it takes a long time to recover from the reputational knockout the company can suffer. Keeping in mind the effect that a data breach can have on a company, the cyber security companies will likely to reap more profit from the market in the approaching quarters.
Two leading cyber security firms
In 2015, many large firms suffered from data breaches. Undoubtedly, it looks like none of the organizations were resistant from the risk of cyber attacks. But, for security service suppliers, operative and effective cyber security solutions are becoming a crucial part of doing business, with need for their facility set to escalate in the coming years. Therefore, stockholders should research Palo Alto Networks and FireEye. At present, these two firms are the most prevalent firms available in the security sector.
FireEye is a front-runner for next generation cyber security. The company not only offers security products such as anti-virus software and firewalls to defend known threats, but also comprises of virtual-machine-based security platform, which offers real-time threat protection against so called zero-day activities – attacks on exposures that, up to that point, were mysterious to the security community.
The company’s protection system is additionally braced by its Threat Intelligence subscription service, which gathers data from its worldwide network of virtual machines to continuously update its network to efficiently identify and protect from newly discovered threats. This intelligent facility provided by FireEye reinforces the company’s value proposition.
Every new customer boosts more data points, which improves the company’s protection services and makes them even more attractive for new and old customers. It's a righteous cycle that should carry on benefiting FireEye and its mounting network of costumers.
Conclusion
Given the growing cyber security market, I think investors can benefit substantially by betting on cyber security companies. My two favorite picks from the sector are Palo Alto Networks and FireEye. Palo Alto Networks is the market leader with a well-cemented position, whereas FireEye is a great speculative play.
