Technology stocks surged yesterday after the busiest earnings week started off with some of the companies reporting strong quarterly results. In the broader technology sector, cyber security stocks stole the show after Fortinet Inc. FTNT and Check Point Software Technologies Ltd. CHKP reported better-than-expected first-quarter 2015 results.
Fortinet gained more than 9% in after-hours trade following better-than expected results wherein both the top line and the bottom line beat the respective Zacks Consensus Estimates. The company’s revenues grew 26% year over year primarily aided by solid sales and marketing strategies and a strong network security market. A large number of deal wins and the addition of over 8,000 customers also contributed.
However, quarterly adjusted earnings of a penny compared unfavorably with the year-ago quarter figure of 5 cents per share. The year-over-year decline in earnings per share was mainly due to higher operating expenses as a result of increased investments in research and development and the implementation of new marketing strategies.
Fortinet’s rival, Check Point, also delivered robust first-quarter results with both earnings and revenues beating the respective Zacks Consensus Estimate and improving year over year. The stock surged over 5% in yesterday’s trading session.
Check Point witnessed higher demand for its data center and high-end appliances. Another factor that contributed to the overall growth was the increasing number of large deal signings.
It should be noted from yesterday’s results that the cyber security stocks are witnessing double-digit growth, while the overall IT spending is anticipated to grow just under 3% in 2015, according to research firm Gartner.
The demand for cyber security is on the rise and both companies have stepped up to deliver as can be seen from the quarterly results. Notably, both Fortinet and Check Point have witnessed a higher number of large deal signings.
With the advancement in technology, more organizations are adopting a bring-your-own-device (BYOD) policy, which has enhanced employee productivity with anytime, anywhere access, while making it all the more necessary for the organizations to enforce data security measures.
Moreover, breaches at Anthem Inc. ANTM and Sony Corp. SNE earlier this year boosted the need for cyber security products. Also, we expect the increasing spending on IT security to benefit cyber security companies’ results, going forward. Per Gartner, worldwide spending on IT security in 2014 was about $70 billion and is likely to reach $76.9 billion in 2015.
Looking at the results of Fortinet and Check Point, we expect positive results from other cyber security players which are scheduled to report soon. Therefore, we believe that it makes sense to invest in this hot industry group.
Here are some stocks which could be interesting long-term investment options for those interested in the space.
CyberArk Software Ltd. CYBR
CyberArk currently carries a Zacks Rank #3 (Hold). The IT industry is a good place for CyberArk to be operating within, as IT services ranks among the top 20% of industries. The EPS consensus has shot up over the past 90 days to 4 cents per share from a loss per share of 26 cents.
The company hasn’t even been trading publicly for a full year yet, but has performed extremely well in this short time frame. The company’s third-quarter 2014 earnings beat our consensus estimate by a whopping 1600%.
CyberArk has built momentum since then, surpassing our consensus for Q4 earnings by 1800%. Indeed, CyberArk’s growth rate is too big to ignore. The company is expected to post earnings on May 7.
VASCO Data Security International Inc. VDSI
VASCO has a Zacks Rank #3. Expect more volatility with this stock, as it has a beta of 2.22. Our consensus estimate calls for an EPS of 18 cents. However, the company is geared to beat earnings this quarter, as it has a positive Earnings ESP of 11.11%.
As per the Zacks proprietary methodology, stocks with a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Earnings ESP have a fairly high chance of performing well in the near term. Zacks Earnings ESP shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Also, as a matter of fact, VASCO has surpassed the Zacks Consensus Estimate in the last four quarter with an average surprise of 428.89%. The company is expected to post its next earnings on Apr 28.
FireEye Inc. FEYE
FireEye has a Zacks Rank #3. Our consensus estimate calls for a loss per share of 80 cents. However, the company is geared to report better bottom-line results, as it has a positive Earnings ESP of 6.25%.
Also, as a matter of fact, FireEye has surpassed the Zacks Consensus Estimate in three out of the last four quarter with an average positive earnings surprise of 7.02%. The company is expected to post the next financial results on Apr 30.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment