By Xavier Brenner We live in the age of the epic corporate hack. Target (TGT), Sony (SNE), TurboTax (INTU) and Anthem (ANTM) and countless other companies have had their computer systems and databases infiltrated by cyber-thieves.
Financial HitCyber-crime costs the global economy about $445 billion a year in lost intellectual property and other costs, according to the Center for Strategic and International Studies (CSIS). And some 61% of respondents to the recent PricewaterhouseCoopers’ 2015 Chief Executive Survey say they lack adequate data security, up 13% from 2014. The multi-faceted challenges facing chief information officers are an opportunity for cyber-security firms and perhaps investors.
Security PlaysFireEye (FEYE) is a stock some analysts think will capitalize on growing demand for computer security services in the years ahead. It recently reported better-than-expected revenue growth. However, there is some risk for investors here. The stock has improved lately, but the company is losing money at the moment as it ramps up its research and development spending. There are more profitable alternatives.
ETFsSplunk (SPLK) and Infoblox (BLOX) have turned heads on Wall Street after robust quarterly earnings. Both stocks performed well in February . CyberArk Software (CYBR) recently revised its earnings up and has seen its stock price increase in recent weeks. It's up about 18% on the year through March 3. There's even an exchange-traded fund (ETF) that specializes in cyber- and software-security plays for investors. Check out the PureFunds Cyber Security ETF (HACK). It advanced 17% in February.
TakeawayAnalysts caution that multiples for some of these companies are quite rich and FireEye doesn't make money at all. So it pays to be discerning.
Yet it is hard to deny that there is a huge demand out there for software security programs and consulting services that allow companies to keep their data safe.Cyber-theft is now a huge fixed cost for companies far and wide. The reality is that companies will need to spend big to keep the hackers at bay.
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Photo Credit: Mike Mozart via Flickr Creative Commons
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