As the world witnesses a rapid digital transformation fueled by the COVID-19 pandemic, the demand for cybersecurity solutions is increasing exponentially. And with more remote and hybrid working models increasing the risks of cyberattacks, businesses around the world are adopting increasingly robust cybersecurity measures.
According to Fortune Business Insights, the global cyber security market is expected to grow at a CAGR of 12% over the next seven years to $366.10 billion. Investors’ interest in cybersecurity stocks is evident in First Trust NASDAQ Cybersecurity ETF’s (CIBR) 27.1% returns over the past nine months.
While large-cap stocks don’t typically offer rapid growth and most large-cap companies in the cybersecurity space are now operating at full scale, heightened volatility is typically associated with small-cap stocks. So, we think it might be wise to bet on mid-cap cybersecurity companies such as McAfee Corp. (MCFE), Trend Micro Incorporated (TMICY), Tenable Holdings, Inc. (TENB) to capitalize on industry tailwinds.
McAfee Corp. (MCFE)
With a market cap of $10.32 billion, MCFE is one of the top players in the cybersecurity space. The company operates through two segments—consumer and enterprise. Its security technologies help home users and businesses to stay ahead of a plethora of fileless attacks, viruses, malware, and other online threats. The company’s personal protection services include device security, online privacy and comprehensive Internet security, and identity protection.
MCFE’s net revenue for the fourth quarter, ended December 26, 2020, increased 13.9% year-over-year to $777 million. While its consumer revenue for the fourth quarter was $426 million, reflecting 23% year-over-year growth, its enterprise revenue of $351 million reflects 5% year-over-year growth. MCFE’s gross profit for the quarter was $521 million, reflecting a 10.6% year-over-year increase. Also, its adjusted EPS increased 11.8% sequentially to $0.38. Analysts expect MCFE’s EPS and revenue to increase 12.9% year-over-year and 4.1% year-over-year, respectively, in fiscal 2021.
On March 30, MCFE announced that it had commenced building a Vehicle Security Operation Center (Vehicle SOC) with Panasonic Corporation (PCRFY) to commercialize vehicle security monitoring services and protect connected vehicles against cyber-attacks. Also in March, MCFE It also announced the general availability of McAfee MVISION Cloud Native Application Protection Platform (CNAPP) on March 29, 2021 and the Globee Awards named the company as a winner in its 17th Annual 2021 Cyber Security Global Excellence Awards. The stock has gained 40.7% over the past three months and closed yesterday’s trading session at $23.92.
MCFE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Value and Sentiment. Click here to access MCFE’s ratings for Growth, Stability, Momentum, and Quality as well.
MCFE is ranked #1 of 23 stocks in the Software-Security industry.
Trend Micro Incorporated (TMICY)
TMICY provides antivirus and other security products that protect the flow of information on PCs, file servers, e-mail servers, and the Internet gateway. Its cybersecurity platforms are used by more than 500,000 organizations and it has partnerships with some of the top companies, including Microsoft Corporation (MSFT), International Business Machines Corporation (IBM) and VMware Inc. (VMW). It has a market cap of $6.80 billion.
For the fiscal 2020 fourth quarter ended December 31, 2020, TMICY’s net sales increased 11.83% year-over-year to $455.5 million. The company’s net income also increased 48.4% year-over-year to $76.7 million. Its EPS climbed by a margin of 48.7% to $0.55.
Last month, TMICY helped Nuffield Health meet its customer’s security needs with an accelerated time-to-threat detection and response and maximized in-house IT productivity. The company also received a five-star rating in 2021 CRN Partner Program Guide, in recognition of its channel strategy. The stock has rallied 11.5% over the past year and closed yesterday’s trading session at $50.51.
TMICY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It also has an A grade for Stability, Value, and Quality. In addition to these ratings, one can see TMICY’s ratings for Sentiment, Momentum, and Growth here.
TMICY is ranked #2 in the same industry.
Tenable Holdings, Inc. (TENB)
Cyber-security solutions provider TENB’s enterprise platform offerings include Tenable.io and SecurityCenter. With a market capitalization of $3.90 billion, the company provides software-as-a-service (SaaS) and is focused on building on its deep technology expertise in the traditional vulnerability assessment and management market to provide analytics that translate vulnerability data into business insight.
TENB’s $118.08 million in net sales for its fiscal year 2020 fourth quarter, ended December 31, represents a 21.8% year-over year rise. Its gross profit has increased 24.4% year-over-year to $97.77 million. The company’s total operating expense has decreased by 7.2% year-over-year to $98.50 million. For the quarter ended March 31, 2021, analysts expect TENB’s EPS and revenue to increase 166.7% year-over-year and 19.8% year-over-year, respectively. Furthermore, it surpassed the consensus EPS estimates in each of the trailing four quarters.
In February, TENB agreed to acquire Alsid SAS, which is an SaaS solution with an on-premises deployment option that monitors the security of Active Directory in real time. The acquisition is expected to close early in the second quarter of 2021, subject to regulatory approvals. TENB achieved ISO/IEC 27001:2013 certification in December 2020 in recognition of its commitment to the highest level of information security management. The stock has gained 82.5% over the past year to close yesterday’s trading session at $37.52.
It’s no surprise that TENB has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Quality, Sentiment, and Growth. Click here to see additional POWR Ratings for TENB (Value, Momentum, and Stability).
TENB is ranked #5 in the same industry.
MCFE shares were trading at $23.83 per share on Thursday afternoon, down $0.09 (-0.38%). Year-to-date, MCFE has gained 43.52%, versus a 9.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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