Technology was a big 2020 winner and has started 2021 out the same way. Many top software stocks have had an outstanding start to the year. Areas that continue to be critical for companies and governments include protecting data and keeping malicious hackers and malware from invading information technology systems and infrastructure.

In a new research report, Goldman Sachs remains very positive on the top cybersecurity and analytics stocks, and with good reason. The rate of serious security problems has increased, and top management won’t stay put long at major U.S. companies if the ultimate effort for security and safety isn’t undertaken and satisfactorily completed.
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Goldman Sachs noted four top new trends in its new research report:

1) Digital transformation initiatives, coupled with an elevated threat environment, are expected to drive a healthy demand environment for security in 2021.
2) Consolidation emerged as a common theme, driven by demand for less complexity and unified management of security posture.
3) Vendors anticipate an improving macro environment will support growth ahead.
4) The pace of cloud migration is accelerating, but security vendors anticipate hybrid demand for some time.

Four stocks are rated Buy and recommended. They are outstanding ideas for aggressive growth investors looking to add this hot technology silo. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

FireEye

This stock was on fire years ago but has traded sideways for almost a year after missing earnings in the past. FireEye Inc. (NASDAQ: FEYE) has been mentioned over the years as a takeover target, and trading 95% below highs that were printed at this time in 2014, it may indeed be on the radar.

The company provides network security solutions addressing advanced persistent threats, which traditional IT security tools like anti-virus, intrusion prevention systems, email/web gateways and firewalls, have largely failed to protect from. These solutions typically compare incoming traffic to a list of known threat signatures, failing to identify and protect against unknown targeted attacks, versus FireEye’s solution that focuses on the behavior of traffic rather than a signature.

Goldman Sachs has remained positive as the company revamps:

Management noted that its transition to a Security as a Service platform provider from a hardware and services focused vendor is progressing well, with a meaningful shift of revenue and billings to high growth areas of the business. As the company focuses on building out Mandiant Advantage, it sees a meaningful opportunity ahead to operationalize and scale its proprietary threat intelligence and domain expertise.

The Goldman Sachs price target for the shares is $26, and the Wall Street consensus target is lower at $22.58. FireEye stock closed most recently at $21.46 per share.

This stock has done well but still offers a reasonably attractive entry point. Fortinet Inc. (NASDAQ: FTNT) secures the largest enterprise, service provider and government organizations around the world. It empowers its customers with complete visibility and control across the expanding attack surface and the power to take on ever-increasing performance requirements today and into the future.
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Fortinet’s Security Fabric platform can address the most critical security challenges and protect data across the entire digital infrastructure, whether in networked, application, multi-cloud or edge environments. Fortinet ranks number one in the most security appliances shipped worldwide, and more than 465,000 customers trust Fortinet to protect their businesses. Both a technology company and a learning organization, the Fortinet Network Security Expert Training Institute has one of the largest and broadest cybersecurity training programs in the industry.

Goldman Sachs noted this about the company:

Fortinet continues to see large enterprises focus on digital transformation with consideration for a longer term shift to a remote work environment. Additionally, the SolarWinds breach has served as a catalyst to drive change toward securing the whole infrastructure rather than just specific assets or the perimeter. The company continues to see strong pipeline generation activity in fiscal year 2021, driven by strong software-defined networking in a wide area network. growth and large opportunity from a multitude of use cases associated with pure firewall play.

Goldman Sachs has a $179 price target, while the posted consensus target is $168.29. Fortinet stock closed most recently at $164.73 a share.

Rapid 7

Investors may not be as familiar with this one, but it has solid upside potential to the analysts target. Rapid 7 Inc. (NASDAQ: RPD) engages in the provision of cybersecurity analytics and automation services. Its product includes the Insight platform, which offers InsightVM, InsightIDR, InsightAppSec and InsightConnect.

Rapid 7 is advancing security with visibility, analytics and automation delivered through its Insight cloud. Its solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. Some 8,400 customers rely on Rapid7 technology, services and research to improve security outcomes and securely advance their organizations.

The Goldman Sachs report noted this about the prospects for Rapid 7 going forward:

The company indicated that the pandemic drove an urgency to move applications and workloads to the cloud, which led organizations to ‘lift and shift’ traditional applications. Additionally, the company expects a greater volume of cloud-native development going forward, augmenting the need for cloud-native security solutions. Rapid 7s’ portfolio of cloud security solutions helps address the need to improve infrastructure visibility, whether based on cloud-native development or traditional application architecture.

The $106 Goldman Sachs price target is higher than the $100.08 consensus target. The stock was last seen trading at $87.61 per share.
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Tenable

This company went public in 2018 and may be the hidden gem in the Goldman Sachs universe. Tenable Holdings Inc. (NASDAQ: TENB) engages in the development of security software solutions. It offers Cyber Exposure, which is a discipline for managing and measuring cybersecurity risk in the digital era. Its products include Tenable.io, Tenable.sc and Nessus Professional. The firm delivers solutions in the field of application security, cloud security, compliance, energy, finance, health care, and retail.

Over 27,000 organizations around the globe rely on Tenable to understand and reduce cyber risk. As the creator of Nessus, Tenable extended its expertise in vulnerabilities to deliver the world’s first platform to see and secure any digital asset on any computing platform. Tenable customers include more than half of the Fortune 500, more than 25% of the Global 2000 and large government agencies.

The Goldman Sachs analysts feel the company has solid growth potential, as evidenced by a solid recent acquisition, and said this in the report:

As Vulnerability Management (VM) is more strategic in nature, if successful, the Alsid acquisition would represent an expansion of the company’s platform to monitor, identify, and manage vulnerabilities in Active Directory accounts. In addition to the deal announcement, TENB indicated that it is seeing incremental growth opportunities and significant traction in securing various assets beyond traditional perimeters, including DevOps environments, cloud-based infrastructure, and containers.

Goldman Sachs has set a $57 price target. The consensus target is $61.60, but the most recent close was at $45.53 a share.

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While the whirlwind around the top stocks in this arena has slowed dramatically from the pace of four and five years ago, the need in corporate America and by governments is increasing every year. These top stocks offer investors solid ways to play the subsector in a multitude of areas.

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