As Cyber Monday dawns, the holiday shopping season is expected to reach a fever pitch. According to New York State Attorney General Eric Schneiderman, $2 billion worth of sales took place last year on this day. These figures are expected to be bettered this year. However, his statement released on Sunday asks customers to remain cautious about online deals and dubious websites.
Officials Issue Warning
Schneiderman said: “As the holiday shopping season kicks off and more consumers plan to shop online, there are simple steps you can take to avoid scams and protect your personal data.” He added: “Consumers should know how to spot fake websites and deals that are too good to be true.”
The New York State Attorney General asked consumers to take several precautions so that online shopping could be a safer experience for them. This includes using secure Internet connections, processing payments on HTTPS web pages, using credit cards and being wary of similar-looking websites.
The Office of Chief Information Officer has also sounded similar warnings. In an email, Katharine Keune, a spokeswoman for the Office of Chief Information Officer asked students in particular to take precautions when shopping online. Keune said: “Free networks that restaurants and coffee shops provide are generally not encrypted.”
Retailers Face Threat
In the recent past, prominent retailers like Target Corp. (TGT), The Home Depot, Inc. (HD) and Jimmy John’s have been affected by data theft. Attacks of such a nature continue to represent a significant threat to retailers. According to a study conducted by the Ponemon Institute in 2013, the frequency and severity of data theft had increased significantly last year.
As consumers step up their purchases, it is important to examine whether retailers are prepared to handle higher volumes. The jump in browsing and purchases can overload the security controls of card issuers. On the other hand, security may not be a priority for retailers focused on high volumes. Unless, of course, they have good security measures in the first place.
Better Regulations
Most administrative efforts to reduce incidents of data theft have been focused on asking retailers to adopt additional precautions. Regulatory action in this area is largely absent. Almost 12 bills were introduced in Congress this year that intended to safeguard US customers from data breaches. However, none of them have passed. These bills have been impeded by a tussle between retailers and card issuers, primarily on the question about which of them would have to take responsibility for data theft and breaches.
This is why government action remains limited on encouraging the concerned parties to voluntarily adopt new cybersecurity standards. These have been developed by the National Institute of Standards and Technology.
However, significant action has been taken on introducing chip and PIN card technology in purchase and benefit cards issued by the government. These measures almost negate the possibility of data fraud. However, the plan, which will also be adopted by some private organisations and the government, will be implemented in Jan 2015.
Only in Oct 2015 will the chip technology become applicable to all parties in the payment chain. Any related party who does not use the technology will become liable for damages. These steps were outlined by prominent card companies in 2011.
Our Choices
Despite the threat of a higher number of breaches, most retailers are better prepared on the security front. Large investments have been made on cyber security and this trend is likely to continue. Below we present two stocks which will gain from these trends, each of which also has a good Zacks Rank.
NCI, Inc. (NCIT) is a premier provider of enterprise solutions and services to the U.S. defense, intelligence, health care and civilian government agencies. This company delivers cost-effective solutions and services in the areas of cyber security and information assurance; enterprise information management and advanced analytics; cloud computing and IT infrastructure optimization; IT service management; and modeling, simulation and training.
Apart from a Zacks Rank #2 (Buy), the company currently has expected earnings growth of 11.7%. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 17.90.
Carbonite, Inc. (CARB) is a leading provider of hybrid backup and recovery solutions for businesses. Headquartered in Boston, MA, the company offers a comprehensive suite of affordable services for data protection, recovery and anywhere, anytime access. The company's backup solutions work automatically and continuously uploading encrypted copies of its customer's files to the servers known as Carbonite Personal Cloud.
Carbonite holds a Zacks Rank #1 (Strong Buy) and has expected earnings growth of 30%.
The trend to increasingly shop online is expected to increase in the days ahead. As consumers’ awareness about these issues increases, retailers are also expected to step up security measures. This is why these stocks would make good additions to your portfolio.
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