Zscaler and Varonis Systems are among the top 7 cybersecurity stocks this earnings season, Wedbush says

cyber security
  • Wedbush analysts expect cybersecurity spending to jump more than 20% in 2021 alone.
  • Cybersecurity stocks will be buoyed by federal spending and a push towards hosting workloads on the cloud.
  • Varonis Systems, Zscaler, Telos Corp., Sailpoint Technologies, Tenable Holdings, Palo Alto Networks, and Fortinet are the firm’s top cybersecurity picks.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Zscaler and Varonis Systems are among Wedbush Securities’ top 7 cybersecurity stocks heading into what the investment firm believes will be a “strong” earnings season for the sector.

In a note to clients on Sunday, analyst Dan Ives and his team said they’re expecting a robust March earnings season for the cybersecurity space due to a growing threat landscape for tech companies and a continued shift to the cloud.

“Cybersecurity sector/stocks have been treading water so far this year, we view a ‘beat and raise’ 1Q as a positive catalyst to move the sector higher for the rest of 2021,” Ives wrote.

The analysts said recent checks on the cybersecurity industry have revealed strong deal flow making them bullish on the sector.

“In particular we are seeing strong deal flow around identity threat detection, privileged access management (PAM), endpoint/ vulnerability security, and a discernible shift to zero trust architecture all gaining steam in the field,” Ives wrote.

Ives and his team also said they believe 44% of workloads will move to the cloud by the end of 2021 and that figure will hit 55% by 2022.

This digital transformation to the cloud is set to buoy cybersecurity names moving forward, according to Wedbush. The firm forecasts cybersecurity spending to increase over 20% in 2021.

Data from Gartner backs up the Wedbush’s stance. Gartner is forecasting the worldwide information security market to reach over $170 billion in net value by 2022 amid a continued push towards cloud hosting.

The shift to cloud for both enterprises and governments is also being accelerated by big tech companies like Microsoft, Amazon, and Google, due to their recent push to enhance cloud offerings.

Ives and his team said they believe the cybersecurity sector could see an additional 300 bps+ lift from President Biden’s federal spending surge in light of recent nation-state attacks from Russia and China as well.

The analysts added that they expect a surge of M&A to take place within cybersecurity from both strategic and financial players in the coming months.

To that point, ThomaBravo announced it acquired the cybersecurity firm Proofpoint for $12.3 billion in cash on Monday.

Ives concluded by laying out his top seven picks for the cybersecurity industry, which included the following: Varonis Systems, Zscaler, Telos Corp., Sailpoint Technologies, Tenable Holdings, Palo Alto Networks, and Fortinet.

Read the original article on Business Insider

Tech stocks can soar another 25% as reopening boosts digital transformations, Wedbush says

NYSE trader
  • Tech stocks will climb 25% or more over the next year as economic-reopening progress spurs new growth, Wedbush said Tuesday.
  • FAANG, cloud, and cybersecurity names will lead the climb, while Uber and Lyft represent the best reopening plays, they added.
  • Valuation concerns are valid, but secular trends lifting the group will offset such worries, according to Wedbush.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The trends poised to lift all manner of tech stocks are only just beginning, Wedbush analysts Dan Ives and Strecker Backe said.

Equity investors are in the midst of a transition. While tech mega-caps and other growth stocks led the bulk of last year’s rally, expectations for a swift economic reopening recently shifted attention toward companies set to benefit most from a recovery. Value and cyclical names have roared higher and left tech names lagging.

Wedbush doesn’t expect the underperformance to last. Blowout earnings from pandemic-darling Zoom show tech stocks are set for another quarter of “beat and raise” reports, the analysts said. Digital transformations will take hold soon after and lift tech stocks by 25% or more over the next 12 months, they added.¬†

“As we have witnessed in the cloud, collaboration, cybersecurity, and 5G, this tech party is just getting started with consumer and enterprise-driven demand catalyzing a multi-year growth boom for the tech sector looking ahead,” the team said.

Wedbush sees¬†FAANG, cloud, and cybersecurity stocks leading the charge. Disruptive recovery names like Uber and Lyft are the firm’s favorite reopening plays, as lifted restrictions will likely revive ridership.

The political backdrop also lends itself to continued strength in tech stocks, according to Wedbush. The Biden administration will likely have a softer tone against China and ease tensions in the “Cold Tech War,” the analysts said. The 2020 SolarWinds hack also places a fresh focus on cybersecurity efforts in government, they added.

To be sure, the tech sector still enjoys elevated valuations following last year’s rally. Debate over the stocks’ pricing will continue, but Ives and Backe expect the group to swing higher even in the face of the broader rotation to value.

“We believe the underlying fundamental stories and white-hot growth creates a yellow brick road to an upward bullish trend,” they said.

Read the original article on Business Insider