The Deutsche Bank team said in a new research note that they did not talk to a single source at the event, be it a customer, vendor or a Gartner analyst, that mentioned any planned slowdown in enterprise spending on security information technology in 2015. In fact, Gartner analysts, resellers and customers seemed to all agree that firewall spending growth is likely to accelerate in 2015, and replacement cycles are far shorter as vendors attach new add-on functionality.
The Deutsche Bank analysts have three top picks in the arena that they recommend and that are rated Buy at the firm.
Check Point Software Technologies
This company remains one of the top tech stocks to buy on Wall Street for a security presence. Check Point Software Technologies Ltd. (NASDAQ: CHKP) is one of the best in helping customers protect against advanced persistent threats, or APTs. Check Point is considered a worldwide leader in securing the Internet, providing customers with uncompromised protection against all types of threats, reducing security complexity and lowering the total cost of ownership. Check Point first pioneered the industry with FireWall-1 and its patented stateful inspection technology.
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Deutsche Bank points out in the report that the company’s revenue growth rate has accelerated almost every quarter over the past year and a half. Many on Wall Street think that Check Point should see accelerating year-over-year growth in product licenses, particularly as the security firewall refresh that appears to be in the beginning stages.
The Deutsche Bank price target for the stock is $95. The Thomson/First Call consensus price target is $91.40. The stock closed most recently at $84.77.
Fortinet
Fortinet Inc. (NASDAQ: FTNT) is also well liked on Wall Street, and analysts have pointed to specific reasons for the bullish posture:
- The large push into enterprise and OMP
- The impact of the improved inventory management
- The new “Easy 4” pricing model released earlier this year, which involves a new bundled product sales strategy
The company’s fast, secure and global cybersecurity solutions provide broad, high-performance protection against dynamic security threats while simplifying the IT infrastructure. They are strengthened by the industry’s highest level of threat research, intelligence and analytics. Unlike pure-play network security providers, Fortinet can solve organizations’ most important security challenges, whether in networked, application or mobile environments, be it virtualized/cloud or physical.
Fortinet shareholders cheered in April as the company posted earnings that beat first-quarter expectations. Forecast revenue during the quarter was higher, and management raised its year outlook above consensus. Wall Street also cheered as the company said the tone of business is very strong, and CEO Ken Xie believes demand for network security software solutions is the strongest “in 20 years.”
The Deutsche Bank price target is set at $45, and the consensus target is $41.79. Shares closed Wednesday at $41.20.
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Palo Alto Networks
This company has been a momentum trader’s dream over the past year. Palo Alto Networks Inc. (NASDAQ: PANW) was reported to have the highest percentage share in the highly competitive firewall bake-offs at 42%. The company also ranked highest with the Wildfire product, which was the favorite in the APT space among the value added resellers with 43%.
The company is helping to lead a new era in cybersecurity by protecting thousands of enterprise, government and service provider networks from cyberthreats, and it boasted a staggering year-over-year billing growth. Unlike fragmented legacy products, its security platform safely enables business operations and delivers protection based on what matters most in today’s dynamic computing environments: applications, users and content.
Palo Alto Networks security platform has new features that were recently introduced that help security professionals overcome the distractions and time spent on problems caused by the overwhelming volume of alerts and manual processes associated with operating many discrete security products and, instead, expand breach prevention capabilities and boost operational efficiency. This was a point that the Deutsche Bank team said is becoming more and more critical due to the increase in volume and activity.
Deutsche Bank has a $200 price target, but the consensus target is set at $181.20. The stock closed trading Wednesday at $174.67.
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The Deutsche Bank team is right when they say there is no bubble in the security stocks. While some could perhaps use a breather, the industry is hot because it is needed. IT safety and security at high levels is not a luxury anymore; it is a necessity. Aggressive growth investors ought to carve out a slot in their portfolios for some of these stocks.
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