April 20, 2023

Analysis: Cybersecurity Industry Avoids Silicon Valley Fallout

By Ricardo Brum

Editor’s note: Reporter Ricardo Brum tracked the health of the cybersecurity industry by analyzing SEC reports and stock price data that he scraped from Google Finance.

In general, the cybersecurity industry has been able to avoid fallout from the Silicon Valley Bank’s crisis, gaining in stock value over the last month, or at least, when facing losses, not undergoing any significant ones. The companies have been meeting and surpassing investors’ expectations, with increased revenue figures and positive quarterly earnings reports observed in the industry, but caution is advised nonetheless.

While the industry has provided strong figures which satisfied shareholders, investors are still approaching the year cautiously, as fears of a recession loom. Although the reason for this apprehension does not stem from the industry, but rather the market as a whole, it still will be a determinant for the stock price in the coming months, and whether or not the cybersecurity industry will be able to keep itself recession-proof is yet to be determined.

The company’s stock has performed well over the past month, having gained 9% in value, an increase from $61 per stock in mid-March to $67 per stock in mid-April. The stock value is roughly the same as it was one year ago, when it was traded at $68, before falling through the year as the company struggled to meet market expectations. The recent increase in stock price has been attributed to strong product and service revenue, with a 32% increase in revenue overall in 2022. The company’s most recent Form 13F filing with the SEC shows that the investment advisory firm AE Wealth Management LLC increased its position in the company by 2.6%, and the Royal Bank of Canada upped its price target on Fortinet from $57 to $68, strengthening the bullish trend.

Palo Alto Networks
The multinational’s stock value has been up 6% since mid-March, a shift from $189 to $201 in stock price. The positive momentum comes at a time when the company’s average brokerage recommendation (ABR) is at 1.26 on a scale from 1 (Strong Buy) to 5 (Strong Sell), which is calculated based on the recommendations of 31 different brokerage firms. Portland Global Advisors LLC has also substantially increased its holdings in the company, by 89.3% total, leading to a $3.29 million in holdings according to a filing with the SEC. Equity research analysts see mostly positive prospects for the company, with Credit Suisse Group, Scotiabank and Mizuho all boosting their price target for the stock.

Check Point
Check Point’s stock price has not experienced any significant variations, remaining at a stable $132 price per stock, compared to last month’s $131 price. The company’s stale month can be attributed to a downgrade by research analysts, which caused concern in the market, though accompanied by sound revenue figures, preventing the concerns from affecting the stock price. Although current earnings reports remain positive, the downgrade comes from changing dynamics in the industry, which has led analysts to worry that external competition might become a challenge to the company in the long term.

The company has gained value since March, a 7% increase in its stock price, amounting to a change from $16.64 to $17.96 per stock. Analysts consider the stock to be currently undervalued and to have high growth potential, as trading is at good value and earnings are forecast to grow. One risk also pointed out by analysts is that the company’s debt is not well covered by operating cash flow.

Crowdstrike has gained 3.49% in stock value in the last month, which led to an increase in price from ca. $132 to ca. $137. Expected growth in subscription-based annual recurring revenue, alongside a new partnership with Dell, have led to good momentum, with Wall Street investors expecting a bullish run of the stock after it escaped mostly unscathed from the Silicon Valley Bank fallout. Recent competition threats from Microsoft have put the company under alert, and could prove to be potential challenges in the near future.

The company’s stock price has fallen 1.30% since mid-March, fluctuating from $50.94 to $52 in early April, and falling back down to $50.28 as of April 17. The stock has generally underperformed when compared to its competitors, and insiders have sold company stock over the last 3 months, ditching over a million dollars worth of shares. Cisco is still forecasted to grow this year and is considered undervalued by analysts.

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