With Old Security Giants at Risk, Stifel Has 2 Newer Cybersecurity Picks

By Lee Jackson Published Sep 25, 8:25AM EDT

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As the cybersecurity worries have increased, the companies that have barged into the sector with new products and innovation are starting not only to become the new standards for the industry, but they are slowly but surely starting to push out some of the old established companies. A new research report from Stifel highlights the top companies that are leading the charge in the sector.

The Stifel report notes that the historically leading vendors in the security software industry are losing both market share and the technology innovation battle to the top new vendors. It cites endpoint security and the broader firewall and perimeter security market as the two key areas where huge gains are being achieved.

Stifel has two top new-generation companies rated Buy that have been put on sale recently, and they could provide aggressive investors with huge gains by the end of the year.

FireEye

This company has been absolutely crushed and could offer massive upside. The stock has tumbled almost 40% since June. FireEye Inc. (NASDAQ: FEYE) has been mentioned recently as a takeover target, with numerous big tech companies listed as possible suitors. The company announced earlier this year that it will be working with Visa to help the credit card giant develop products for merchants and credit card issuers to defend against large-scale attacks on payment data. FireEye is in an arena where it may drive the next big wave of cybersecurity technology.

FireEye has invented a purpose-built, virtual machine-based security platform that provides real-time threat protection to enterprises and governments worldwide against the next generation of cyberattacks. These highly sophisticated cyberattacks easily circumvent traditional signature-based defenses, such as next-generation firewalls, IPS, anti-virus and gateways.

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The FireEye Threat Prevention Platform provides real-time, dynamic threat protection without the use of signatures to protect an organization across the primary threat vectors and across the different stages of an attack life cycle. The core of the FireEye platform is a virtual execution engine, complemented by dynamic threat intelligence, to identify and block cyberattacks in real time. FireEye has over 3,400 customers across 67 countries, including over 250 of the Fortune 500.

The Stifel price target price for the stock is $55, and the Thomson/First Call consensus price target is $54.09. The stock closed most recently at $33.60.
Palo Alto Networks

This company has been a momentum trader’s dream over the past two years, and we covered the love that analysts spread on the stock earlier this month after the huge earnings. Palo Alto Networks Inc. (NASDAQ: PANW) is helping to lead a new era in cybersecurity by protecting thousands of enterprise, government and service provider networks from cyber threats, and it boasted 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.

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The company blew away earnings and any macro sector concerns that investors and Wall Street may have harbored toward the new revolution vendors and security were sent packing as the company produced yet another impressive beat-and-raise quarter. Billing revenue and the bottom-line revenues smashed the street’s estimates as the company continues to dominate the sector. Huge top-line numbers and stellar gross margins were the reason for the big upside in earnings.

The best thing for investors is this was against already tough comparisons, and with the demand for security continuing almost unabated the company could be poised for years of incredible growth. Palo Alto continues to be ranked the highest with the Wildfire product, which has been the favorite in the Advanced Persistent Threat (APT) space among the value added resellers who carry and sell the product. Toss in 20% upside in billing for the quarter, and the story is a killer going forward.

Lastly, other analysts on Wall Street have made it clear that the feedback they got from the professionals at recent security conferences was the most bullish on Palo Alto, and the company is gaining real traction with larger data centers firewalls.

Stifel has a $200 price target, and the consensus target is $193.20. The stock closed trading Tuesday at $180.77.

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The older legacy vendors like Checkpoint and Symantec are losing ground to these and other top companies in the sector, and they will continue to unless they update their offerings to compete with newer technology and innovation in an increasingly competitive field.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.