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5 Cybersecurity Stocks to Buy on Simmering US-Iran Tensions

Swarup Gupta

On Jun 21, news emerged that a day earlier the United States Cyber Command had carried out online attacks on Iranian targets. The operation, first revealed by a report from Yahoo News, was carried out on the same when President Trump decided not to go ahead with military strikes against Iran. The attacks were retaliation for Iran’s destruction of an American surveillance drone.

The choice of cyberwarfare as low level response opens up a whole new world of possibilities. Iran’s ability to retaliate in kind has improved radically over the last decade.  This would only boost the demand for cybersecurity solutions among U.S. companies of all sizes. Investing in these stocks from this sector would make for a smart choice now.

Cyberattacks Replace Military Strikes on Iran

On Jun 21, President Trump said that he had called off the military attack on Iran 10 minutes before the strike because he thought that it would be a disproportionate response. Trump said on Jun 22 that he was “getting a lot of praise” for averting an attack, which would have caused multiple deaths.

Instead, the United States decided to press ahead with online attacks, planned carefully over the past few weeks. They were a response to both the downing of the American drone as well as the tanker attacks that took place earlier this month.

A number of systems were targeted, including an Iranian intelligence group, which apparently helped in planning the attacks on tankers in the Strait of Hormuz. Other targets include computer systems, which control the launch stages of Iranian missiles.

Retaliation Likely, Cybersecurity Stocks to Gain

Investors should keep in mind that the threat of Iranian retaliation to these cyberattacks is both real and credible. Iran’s capability in this area has improved considerably over the last decade as borne out by the attacks on American banks in 2012 and 2013. In fact, Iran’s cyber forces has had years of experience in attacking U.S. targets, including the attack on a Las Vegas Casino in 2015.

It comes as no surprise then that cybersecurity stocks will gain in an environment already brimming with online threats. The Prime Cyber Security ETF (HACK) is already up 17.9% year to date, evidence of the field’s growing importance in corporate America. As cyberattacks grow, spending on cybersecurity will only increase.

Another reason for changing security priorities is the growing popularity of cloud computing. As more and more companies embrace this trend, legacy security solutions such as antiviruses and firewalls are losing market share to cloud-based options such as Web security gateways. This is likely to spark off a new trend of spending on fresh cybersecurity options.

Our Choices

The American attack on Iranian computer systems is perhaps the first shot fired into cyberspace in the ongoing conflict between the two countries. Likely retaliation will further boost spending on cybersecurity by U.S. companies. Cloud-based options will gain the most from this trend as they seem to represent the future.

Investing in cybersecurity stocks looks prudent. We have narrowed our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Qualys, Inc. QLYS is a provider of cloud security and compliance solutions that enable organizations to identify security risks to their information technology infrastructure, and help protect their IT systems and applications from cyberattacks.

Qualys’s expected earnings growth for the current year is 10.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the past 60 days. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cisco Systems CSCO is benefiting from its expanding footprint in the rapidly growing security market. In fact, its comeback story has been largely fueled by strong contributions from security, Infrastructure Platforms and applications.

Cisco has a Zacks Rank #2 (Buy). The company’s expected earnings growth for the current year is 18.4%. The Zacks Consensus Estimate for current-year earnings has moved north by 0.7% over the past 60 days.

Fortinet Inc. FTNT is a provider of network security appliances and Unified Threat Management (UTM) network security solutions to enterprises, service providers and government entities worldwide.

Fortinet has a Zacks Rank #2. The company has expected earnings growth of 15.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 2.4% over the past 60 days.

Radware Ltd. RDWR is a developer, manufacturer and marketer of cyber security and application delivery solutions.

Radware has a Zacks Rank #2. The company has expected earnings growth of 21.8% for the current year. The Zacks Consensus Estimate for current-year earnings has moved 5.8% north over the past 30 days.  

Zscaler, Inc. ZS is a cloud security company with global operations.

Zscaler has a Zacks Rank #2. The company’s expected earnings growth for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has moved 36.6% north over the past 30 days.

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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
 
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