That concern should be a boon to the companies that make security software. Here are several that investors may want to consider.
Palo Alto Networks (PANW) - Get Report is one. Its shares have more than doubled this year, and its revenue rose 50% in its latest quarter as it reported adjusted earnings per share that topped estimates by 3 cents. It continues to post net losses, however.
Cisco (CSCO) - Get Report , whose shares are up about 27% this year, is No. 1 in market share in security software, according to according to research firm IDC. Security has become the company's fastest-growing segment as revenue in the business rose more than 25% in Cisco's most recent quarter.
Another way to gain exposure to the network-security industry is through iShares North American Tech-Software ETF (IGV) - Get Report , which has gained 16% in 2014. The fund is home to security companies such as Symantec (SYMC) - Get Report , which is up 12% in 2014, and Fortinet (FTNT) - Get Report , which has gained 62%.
Fortinet is the world's No. 3 security-software vendor. Its third-quarter billings rose 29%, and it estimated revenue for its fourth quarter will be $195 million to $200 million, above analysts' average estimate of $193.4 million, according to Thomson Reuters. Expectations, though, are very high as the company's stock trades at about 172 times this year's earnings estimate of 18 cents a share.
Another company to keep an eye on is Check Point Software (CHKP) - Get Report , the world's No. 2 security software vendor, whose shares have gained 24% this year. On Dec. 17, it was upgraded to buy from hold by Deutsche Bank, which set a $90 price target. Check Point's price-to-earnings ratio of 23 is reasonable for stocks in the security-software industry.
TheStreet Ratings team rates PALO ALTO NETWORKS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PALO ALTO NETWORKS INC (PANW) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."
You can view the full analysis from the report here: PANW Ratings Report
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.