Cybersecurity was red hot in 2014 and the first half of last year. However, since last summer the stocks has been absolutely emasculated, and they may be providing aggressive investors an outstanding entry point. In addition, the falling prices also have heated up mergers and acquisitions chatter. In fact, just this week rumors started to swirl that CyberArk Software Ltd. (NASDAQ: CYBR) was in discussions with an industry leader about being acquired.

Cybersecurity is one of the six key themes being highlighted at Merrill Lynch this year. We screened the Merrill Lynch research data base for the companies it feels are best positioned not only for 2016, but for years to come. We found three and all are rated Buy.

Check Point Software Technologies

This remains one of the top tech stocks to buy on Wall Street for a security presence, and it is said to be the one in talks with CyberArk. Check Point Software Technologies Ltd. (NASDAQ: CHKP) is one of the best in helping customers protect against advanced persistent threats. It 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.

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 year-over-year accelerating growth in product licenses, particularly as the security firewall refresh appears to be in the beginning stages. Acquiring CyberArk could add a fresh product offering to the company’s already industry leading portfolio.

The company reported outstanding third-quarter results on strong demand for its advanced threat prevention and mobile security technologies.

The Merrill Lynch price target for the stock is $94, and the Thomson/First Call consensus price target is $92.26. Shares closed Thursday at $77.63.
Fortinet

This company was rewarded with good earnings last by getting absolutely hammered, and it is down over 40% from highs posted last summer. Fortinet Inc. (NASDAQ: FTNT) is well liked on Wall Street, and 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 posted outstanding third-quarter results on the top and bottom line, but the shares were taken to the woodshed for a beating on forward guidance that didn’t sit well with many of the analysts covering the stock. Billings growth grew a staggering 40.5% year-over-year, driven by strong demand for high-end appliances, subscriptions and new product offerings.

Many on Wall Street remain very positive on the company and note that while the fourth-quarter guidance was less than expected, some of that can be attributed to weak Canadian and emerging markets. Analysts think that Fortinet can continue to outgrow the market in the foreseeable future due to sales force productivity gains and product refreshes. It is possible a service-oriented company like IBM or Hewlett Packard Enterprise would have an interest in acquiring the company.

The Merrill Lynch price target is $51, while the consensus target is $46.96. Shares closed Thursday at $29.29.

Barracuda Networks

This small-cap play could have outstanding upside for aggressive accounts. Barracuda Networks Inc. (NYSE: CUDA) provides cloud-connected security and storage solutions that simplify IT. These powerful, easy-to-use and affordable solutions are trusted by more than 150,000 organizations worldwide and are delivered in appliance, virtual appliance, cloud and hybrid deployments. Barracuda’s customer-centric business model focuses on delivering high-value, subscription-based IT solutions that provide end-to-end network and data security.

The stock was absolutely crushed after reporting third-quarter numbers that badly missed analyst estimates. One of the biggest concerns is that customers are moving to the public cloud, which could be the greatest threat to Barracuda as many of applications are provided by public cloud providers as part of the service contracts.

The Merrill Lynch analysts see the company as disruptive as it provides low-cost, easy to use technology and has a consumer-like marketing strategy and a direct sales process, as well as a subscription business model that translated to significant recurring revenues. The company is also a very viable takeover candidate.

Merrill Lynch has a whopping $20 price target, and the consensus target is $19.38. The stock closed most recently at $10.50.

The market for cybersecurity solutions will only grow. At the margin, every company with a network has to have some measure of security, and these companies provide it on varying levels. These stocks are more suited for aggressive growth accounts that can stand fluctuations in price.

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