After the “Worst IT Outage In History,” Cybersecurity Stocks Are Rallying — Here’s Why
Glenn Medeiros may have been singing to a lover, but investors are dedicating “Nothing’s Gonna Change My Love For You” to cybersecurity. Not even the biggest cybersecurity outage in history could overshadow the industry’s importance.
Great firewall: Earlier this year, analysts were alarmed when cloud security platform Palo Alto Networks announced it would start bundling products to win over increasingly cost-conscious customers. This move raised concerns about a potential price war in the internet security sector, adding to worries as other tech firms also lowered their forecasts. But in the end, the industry has continued to rally — with Global X Cybersecurity ETF up 30% over the past year. And after a strong quarter of earnings, the market is easing fears about a slowdown.
- Palo Alto Networks’ “Platformization” policy has mostly paid off, with billings rising 12% year-over-year (YoY), leading it to raise its 2024 outlook.
- Competitors have seen similar growth, with Zscaler, Fortinet, and Check Point Software reporting Q2 revenue increases of 32%, 11%, and 7% YoY, respectively.
No Trouble in Cyber-Town
Cybersecurity companies help blunt attacks, prevent data breaches, and minimize outages — but ironically, several have suffered from the same issues they aim to protect against. Still, their shares are doing well, showing the sector’s value.
- Okta, which experienced a data breach affecting virtually all of its clients in Oct. 2023, has seen its stock surge ~40% YoY due to strong revenue growth.
- CrowdStrike, which caused the “worst IT outage in history” just weeks ago, has climbed 22% from its Aug. 2 lows — with its one-year return still at a stunning 73%.
Forward-looking: With data breaches and hacks becoming a staple of digital society, online safeguarding companies are expected to remain at the forefront. That’s why big players like Cisco have made layoffs to lean into the emerging theme — and why Google bid $23B to acquire a cybersecurity startup. In the end, the crowded cybersecurity field is likely to get even more competitive — but luckily for them, there’s plenty of room to solve America’s digital security problems… just ask all the businesses that got hacked this year.
