In this 8 part blog we focus on 8 long term socio economic and consumer trends that are shaping the world we live in today. Any investment decision, medium or long term, must be planned based on key influences to the changing landscape of the world we live in, while keeping in view political and regulatory pressures placed on many industries. As technology companies play a bigger role in our daily life and become larger than entire economies, government intervention and scrutiny is unavoidable to curb their monopolistic influence although that may not have been the intent.
Part 1 : The Cybersecurity Conundrum.
Protecting the security of Cloud & I.T. infrastructure has become almost as critical as protecting one’s border. Cyber attacks are so frequent and sophisticated these days that it poses an eminent threat to any sovereign nation today and its people. Focusing our attention on the US, we identify the key players in the cyber security industry that are leaders in this industry due to their unique expertise and sophisticated software capabilities in protecting data servers and other cloud infrastructures from being hacked by cyber criminals and causing millions if not billions of dollars of loses through ransom demands or stolen data. In 2021, we had many major incidence like the Colonial Pipeline Breach , Microsoft Breach, Facebook Data Leak and the list goes on and on. The demand for cyber security has never been higher and here are some names you should be looking at:
CrowdStrike Holdings Inc (CRWD)|NYSE|USD262.00|10th Sept Closing|Mid to Long Term Investment
CrowdStrike has an impressive growth trajectory. It posted strong second quarter earnings which were better then analyst’s expectations due to massive shift to cloud computing of late and cyber-related breaches. Analyst have given it a buy rating with price target of USD335.00. The company has roped in several large customers over the quarter and has been increasing subscription based clients quarter after quarter. It reported a 70% year on year growth in its 31st August earnings report. Its Falcon platform is one of the leading cloud protection solutions today. Although the company has yet to post a profit since its June 2019 listing but its revenue growth is phenomenal and is poised to be one of the leaders in an industry that is only going to grow in demand.
Mcafee Corp (MCFE)|NYSE|USD20.90|10th Sept Closing|Medium to Long Term Investment
McAfee is a company most are familiar with and may have used for protecting devices against viruses, malware & ransomeware. It operates in the consumer device protection segment and offers other services like secure Virtual Private Network (VPN), Identity Theft Protection & Password Management products. Unlike Crowdstrike which focuses more on B2B services, McAfee focuses on protecting consumers from day to day cyber security risks. Its earnings are forecasted to grow over 60% per year until 2023. It is also the most reasonably priced stocks in our list. McAfee is a value stock . The company has grown approximately 73% per year over the last 5 years. The current trends point to more people transacting online and therefore requiring better device security, especially for banking and payments. Furthermore, it is trading 35% below its all time high and is a good buy. Its shares dropped over 10% on 10th September closing due to a Public Offering of 20million shares into the market.
Palo Alto Networks Inc (PANW)|NYSE|USD457.26|10th September Closing|Medium to Long Term Investment
Palo Alto posted an incredible 4th quarter results on August 24th. Revenue rose 28% year on year to 1.22 billion and that has driven it shares to an all time high. Although at time of publishing on 13th September the shares have dipped in intra-day trading by almost 2% which could represent a buy opportunity if it dips further. Rated amongst the top cyber security companies in the world today, PANW offers firewall appliance and software for private and public network security whether on private or public cloud environments. Another key offering is its subscription service for areas of threat prevention, malware and persistent threat, laptop and mobile device protection, and firewall; and DNS security, Internet of Things security, as well as threat intelligence, and data loss prevention. The company estimates between a 26%-28% revenue growth for 2021 and most analyst have given Palo Alto a price target of between USD485.00-550.00. While Goldman Sachs has given a price target of between USD515.00 -535.00.
Zscaler Inc (ZS)|Nasdaq|USD270.64|10th September Closing|Medium to Long Term Investment
Zscaler is a known cloud security company worldwide and has a forecasted revenue growth of 24% per year. They have doubled the number of high paying clients (over USD1million) in 2021 to 202 clients. Although they are still unprofitable (as are Crowdstrike & Palo Alto) they expect to be profitable within 3 years given the growing demand of cybersecurity in the world of remote work and cloud computing. Analyst price target ranges from USD285.00-345.00
Apart from individual companies there are 2 ETFs that we would recommend to those who want a diversified investment in this industry are :
Global X Cybersecurity ETF (BUG)|Nasdaq|USD31.91|10th September Closing|Medium to Long Term Investment
This ETF has large holdings in Zscaler, Fortinet Inc, Crowdstrike, Palo Alto Networks Inc, Okta Inc and several others. It is currently the best performing ETF in the cybersecurity space. It has jumped over 30% in the last 6 months . Pretty decent returns for an ETF.
First Trust Nasdaq Cybersecurity ETF (CIBR)|Nasdaq|USD50.85|10th September Closing|Medium to Long Term Investment
First Trust is the largest cybersecurity ETF with Asset under management of almost 5 billion dollars. It is a well diversified ETF focusing on mainly cybersecurity, aerospace & defence companies.