Cyber security stocks are on fire
In one of the largest cyber attacks in history, a ransomware named WannaCry has infected nearly 300,000 computers across 100 countries. This attack has spurred speculation on which stocks could benefit from boosts in cyber security spending by companies and government agencies. Valuations of the cyber security industry have already risen over the past week as investors expect these businesses to gain from increased awareness of cyber risks.
Neil Campling, head of technology research at Northern Trust stated, “These attacks help focus the minds of chief technology officers across corporations to make sure security protocols are up to date, and you often see bookings growth at cyber security companies as a result.”
Shares of the Pure Funds ISE Cyber Security ETF (HACK) that provides exposure to cyber security stocks gained 3% in the 3 trading days following the initial attacks. The market capitalizations of the five biggest cyber security-related companies in the industry included in the HACK ETF rose $5.9 billion in early trading on May 15th with Symantec (SYMC) leading the gains. Its five biggest constituents are Cisco (CSCO), Symantec, Check Point Software (CHKP), Juniper Networks (JNPR) and Palo Alto Networks (PANW).
The largest gainers from the WannaCry attack were Mimecast (MIME), Sophos Group (SOPH), Proof Point (PFPT) and FireEye (FEYE). Shares of the companies have gained 8%, 18%, 7% and 6% since Friday.
Bernstein analysts believe defense stocks like Raytheon (RTN) and BAE systems (BAESY) will gain from a rising demand in their commercial cyber security businesses while government spending on cyber security will benefit stocks like General Dynamics (GD), Lockheed Martin (LMT) and Northrop Grumman (NOC).
Brian Lord, a managing director of cyber and technology at cyber security firm PGI expects cybersecurity spending to increase by 10% by 2020 as companies and governments recognize the threats of cyber attacks and outdated systems get replenished.
Morgan Stanley (MS) upgraded Cisco (CSCO) to “overweight” on Monday and mentioned in a report, “Reducing the cost of security breaches by only 10 percent can save global enterprises $17 billion annually.” Shares of Cisco have gained 2.6% since Monday.
