New cybersecurity threats are popping up on a daily basis and companies are rushing to insure their data are secure. These are 3 stocks in the space that could be great investment ideas in the future.
EBay (EBAY) just announced a major cyber-attack that compromised the personal data of 145 million users. But it didn’t exactly handle the attack like you’d expect a company like eBay to handle a major breach like this. Many eBay users complained they received the news of the breach from various media sources prior to hearing anything from eBay.
The company reported hackers attacked the site between the end of February and early March with login credentials obtained from a few eBay employees. The hackers then accessed a database containing all user records and copied “a large part” of the credentials.
Illinois Attorney General Lisa Madigan announced the states of Connecticut, Florida, and Illinois are conducting a joint investigation into the matter. The breach would far surpass the size of the Target breach last year, which affected about 70 million customers, but fall short of the hack of Adobe Systems in October 2013, when about 152 million user accounts were compromised. As more major indices broke higher on May 22, 2014, eBay was off a little over 1%.
This doesn’t even scratch the surface of the scope of attacks we’ve seen recently. Some estimates say cyberattacks on companies increased 42% in 2012 from a year before. Earlier this year Neiman Marcus confirmed hackers gained access to its database and made unauthorized charges throughout the holiday season. Even JPMorgan Chase replaced 2 million debit and credit cards because of the large number of recent cybersecurity attacks.
According to tech research firm Gartner, companies are projected to spend $67 billion on information security this year. Further, spending is estimated to increase by close to 39% to $93 billion by 2017. Those are big numbers on the table for the companies in this industry to grab at.
Imperva (IMPV) is engaged in the development of protection software and services for business applications and databases. It offers SecureSphere Data Security Suite to protect sensitive data from hackers and malicious insiders along with providing a fast and cost-effective route to regulatory compliance. Over 3,000 customers in more than 75 countries rely on the Imperva SecureSphere platform to help safeguard their business.
IMPV is a Zacks Buy with 2 analysts raising estimates for the current quarter, current year, next quarter, and next year within the last 30 days. While IMPV has yet to turn a profit, the earnings consensus sees the loss shrinking from $2.62 down to $2.23 for the current year. Last quarter, earnings came in at a 63 cent loss versus consensus estimates calling for a 76-cent loss. IMPV’s next earnings release is slated for Aug. 6.
The chart shows the story of a momentum stock that dropped like a rock and now is re-establishing itself. In early March IMPV traded as high as $67.12 before breaking below its 25-day moving average shifted by 5 days (25x5). When preliminary first-quarter results were announced on April 10, IMPV dropped like a rock, losing 44% of its value. Couple that with a downgrade from Oppenheimer on the same day and you have a perfect storm.
But now you have a stock trading at a third of where it once traded at the same time its earnings outlook is beginning to improve. The stochastics have nudged above extreme oversold territory and there has been a bullish cross. The 25x5 now sits about $2 above where the stock is trading today. A few more days of bullish price action and a new uptrend could be established.
For a long time, the big boy on the block in this segment of the market has been Symantec (SYMC). Think Norton Anti-virus software that’s been around since dial-up internet. Symantec is a global leader in security, backup, and availability solutions. The company has been around since 1982 and has a market cap of over $15 billion.
Analysts have been all over the board regarding Symantec recently. Two analysts have raised their estimates for next quarter while 2 analysts have dropped them. This has kept the consensus for next quarter right at 40 cents per share. This is a big contributing factor to their Zacks Hold. One bright spot is the earnings surprise history. SYMC has beat consensus in each of the prior 3 quarters by an average of 19.23%.
The technical chart looks pretty decent for SYMC as well. After chopping down slowly since last August, Symantec bottomed out in mid-March. Since dropping down to $18 a share, SYMC has recovered nicely and currently sits just above $22. It’s been trading above a positive sloped 25x5, giving an overall bullish bias to the price right now. The price level it’s trading at today was firm support from the stock from November last year through the start of this year. I expect $23.50 to provide some resistance to the upside. If that level gets breached then $25 becomes the next immediate focus.
A third option in the cybersecurity world is Check Point Software Technologies (CHKP). Check Point touts itself as the “worldwide leader in securing the internet.” The company provides customers with protection against all types of threats, reduces security complexity and lowers total cost of ownership. Since the company began in 1993 its focus has been on IT security. Its Software Blade Architecture provides customers with flexible and simple solutions that can be fully customized to the meet the exact security needs of any organization.
Checkpoint is a Zacks Hold mostly due to a lack of agreement between analysts covering the stock. For example, next year’s earnings have been revised to the upside by 3 analysts and to the downside by 2 analysts within the last 30 days. Even though they may not agree, they are usually spot on as far as consensus is concerned. Over the last 4 quarters earnings have come within 3.37% of consensus each quarter. Current year consensus calls for $3.38 per share when CHKP reports July 17.
CHKP stock is right on the verge of a major buy signal. After a steady increase for the last year CHKP hit a high of $69.92 on March 7. Since then there has been a little bit of weakness in share price with CHKP coming down to test the $60 level in late April. Once the downward pressure was absorbed, CHKP started to trickle higher. Now it sits just below the 25x5 on the cusp of re-entering its uptrend. Stochastics are basically neutral in the 50s. Should the uptrend continue expect CHKP to run into decent resistance at the $68 level before attempting another run at the prior 52-week high.
As technology becomes more and more a part of daily life, you can expect that cyber security will become increasingly more important. New threats seem to pop up on a daily basis. Companies are rushing to insure their data are secure. This should bode well for the cybersecurity industry. These are 3 stocks in the space that could be great investment ideas in the future.
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