There’s one sector that is poised to benefit from worries over how Russia will respond to U.S. sanctions following what President Joe Biden called the beginning of invasion of Ukraine — cybersecurity.
Based on recent conversations with chief information security officers and some political contacts in Washington, D.C., Wedbush analyst Dan Ives said there is a growing concern that “massive cyberwarfare” could be on the horizon that will spark an increase in advanced-persistent-threat (APT) spending to prevent Russia-based cyberattacks.
“With many high profile cybersecurity attacks coming from Russia over the past few years it’s a matter of when not if this increased cyberwarfare activity begins over the coming weeks, with the Ukraine invasion a ‘powder keg situation’ with broader cyberwar implications felt around the globe,” Ives wrote in a note to clients.
With the Ukraine situation adding to the “nervousness and market jitters” that started with the “risk-off” market environment resulting from the Federal Reserve’s plan to start paring liquidity, Ives said the underlying growth story around cybersecurity are “unmatched to what we have seen the last decade.”
He believes the cyber sector could see additional growth of two to three percentage points from the Ukraine crisis, on top of the 20% growth already expected in 2022.
Of the “core cybersecurity basket approach” Ives recommended investors own in the current environment, shares of Palo Alto Networks Inc.
rallied 3.3% in morning trading.
The stock’s gain comes after the software company reported late Tuesday fiscal second-quarter earnings that beat expectations and raised its full-year outlook.
Among other names that Ives said he believes are most likely to benefit from additional APT spending are Zscaler Inc.
CrowdStrike Holdings Inc.
Tenable Holdings Inc.
Varonis Systems Inc.
and CyberArk Software Ltd.
Ives also said SailPoint Technologies Holdings Inc.
should be a beneficiary.
The ETFMG Cyber Security exchange-traded fund
fell 0.6% in morning trading Wednesday, reversing an earlier intraday gain of as much as 1.1%.
The ETF has tumbled 15.6% over the past three months, while the S&P 500 index
has lost 8.8%.