A lot is happening in the world of technology. With digital transformation and cloud migration in full force across industries, the number of data breaches is also on the rise. With technology advancing at a fast pace, cyber-crimes are becoming more and more sophisticated.
Cyber criminals continued to take advantage of the ongoing remote and hybrid working environment throughout 2021. A report by cybersecurity firm Check Point gave us an idea about the gravity of the situation. It said that in the first half of last year, cyber-attacks had spiked 29% globally. Moreover, a new and sophisticated attack technique called Triple Extortion led to a 93% surge in global ransomware attacks during the same period.
Vast Scope for Cybersecurity Firms
As per a report by research firm Fortune Business Insights, the global cyber security market size is expected to reach $366.10 billion by 2028, witnessing a CAGR of 12% between 2021 and 2028. This shows us the immense opportunity that lies ahead for cybersecurity firms. Most importantly, this growth opportunity is present across many industries.
Another door of opportunity for the cybersecurity market is the upcoming Web 3.0, an Internet generation where applications and websites are capable of running data analysis like a human professional with the help of Machine Learning, Big Data, and other advanced technologies. Importantly, more and more cybersecurity risks will emerge as this new generation emerges.
Notably, 2021 was the year of cybersecurity startups. Financial advisory company Momentum Cyber’s data reveals that in 2021, cybersecurity startups raised a record $29.5 billion in venture capital, more than 100% up from 2020. This is another display of the solid demand for cybersecurity.
Rising Consolidation in the Cybersecurity Industry
Every new attack or loophole gives rise to a new flurry of action across companies to ramp up their security framework by adding more services from different vendors dedicated to taking care of specific security domains. Companies assume their actions will secure them from any future vulnerability or attack. On the contrary, however, adding more solutions from more vendors only leads to complexities and gives rise to further security gaps.
Firms are slowly starting to realize this issue and are looking for all-in-one solutions. For this reason, there has been an increased rate of consolidation in the cybersecurity world in the recent years. Big cybersecurity giants are gobbling up smaller cybersecurity firms specializing in niche domains. Moreover, big tech firms are also looking at other cybersecurity firms, small or big, to bring them under their umbrella via acquisition.
Recently, Microsoft (NASDAQ: MSFT) entered talks with cybersecurity firm Mandiant (NASDAQ: MNDT) to acquire the latter. Interestingly, Mandiant was also once a stand-alone company that was acquired by former cybersecurity giant FireEye.
A consolidating industry opens up another opportunity for Cybersecurity firms to strengthen their businesses amid the growing demand for stronger security solutions, or to make their businesses attractive targets for bigger firms who are ready to pay a significant amount for them.
Stocks That Can Boost Your Portfolio
The first company that comes to my mind when I think of Cybersecurity is Palo Alto Networks (NASDAQ: PANW). The company is riding on solid demand for its zero-trust network security solutions for organizations. Growing traction in its integrated security solutions Strata, Prisma, and Cortex are driving its growth.
Palo Alto is also a seasoned acquirer of smaller firms to strengthen its business. Its latest acquisition of cloud security firm Bridgecrew, in 2021, was made to bolster the capabilities of Prisma and Cortex, in turn attracting more customers.
Last month, Jefferies analyst Brent Thill reiterated a Buy rating on PANW stock and raised the price target to $650 from $615. The sentiments of the rest of Wall Street also agree with Thill, with a Strong Buy consensus rating. The average PANW price target is $615.96.
Cybersecurity company Fortinet (NASDAQ: FTNT) has been in this game since 2000. Solid demand for its firewall, virtual private networking (VPN), antivirus, intrusion prevention (IP), and various other niche offerings is driving the company’s growth. Being a debt-free company with considerable liquid cash, Fortinet’s strong balance sheet is a huge support to the FTNT stock.
Last week, Morgan Stanley analyst Hamza Fodderwala reiterated a Hold rating and a price target of $315 on Fortinet after supply chain issues affected its Q4 results. However, its strong pipeline prompted management to provide an upbeat 2022 guidance, which impressed Fodderwala.
The rest of Wall Street is also cautious, but mostly optimistic about Fortinet, with a Moderate Buy rating based on 9 Buys and 8 Holds. The Fortinet stock price projections point at an average price target of $358.94.
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