A Look at Cybersecurity ETFs on Q1 Earnings Strength

Digitization has increased the need for cybersecurity given instances of security breaches and threats. We have seen years’ worth of digital transformation in a few months amid the COVID-19 pandemic. Solid earnings have added to the strength. Most of the cybersecurity firms came up with stronger-than-expected earnings, outpacing the Zacks Consensus Estimate for both earnings and revenues (read: 7 Tech ETFs That Survived the Recent Turmoil).

Let’s check out the first-quarter results of some of the cyber security firms that have the largest allocation to the ETFs in this niche area of the technology sector:

Cybersecurity Earnings in Focus

Fortinet FTNT posted earnings per share of 81 cents, easily topping the Zacks Consensus Estimate by 18.7% and improving significantly from the year-ago quarter’s 60 cents. Revenues rose 23% year over year to $710 million and were above the consensus mark of $679 million.  The company projects revenues in the range of $733-$747 million and earnings per share of 83-88 cents for the second quarter. For the full year, it raised the revenues guidance to $3.080-$3.640 from $3.025-$3.075 billion and the earnings per share guidance to $3.65-$3.80 from $3.60-$3.75.

FireEye FEYE reported earnings per share of 8 cents, which beat the Zacks Consensus Estimate of 7 cents and turned around from the year-ago loss of 2 cents. Revenues increased 10% year over year to $246 million and surpassed the consensus mark of $237 million. FireEye expects revenues of $245-$250 million and earnings per share of 8-9 cents for the second quarter. For the full year, the company lifted its revenue guidance to $1.01-$1.03 billion from $990 million to $1.01 billion and earnings per share guidance to 39-41 cents from 35-37 cents.

Proofpoint’s PFPT earnings of 49 cents per share outpaced the Zacks Consensus Estimate of 39 cents and improved from the year-ago earnings of 38 cents. Revenues increased 15% year over year to $287.8 million and surpassed the Zacks Consensus Estimate of $282.3 million (read: Proofpoint to Go Private: Cybersecurity ETFs Surge).

Check Point Software Technologies CHKP posted earnings per share of $1.54, outpacing the Zacks Consensus Estimate of $1.49. It generated revenues of $508 million, which also came above the consensus mark of $502 million. On a year-over-year basis, earnings grew 9% while revenues were up 4%.

CyberArk Software CYBR earnings of 9 cents per share outpaced the Zacks Consensus Estimate of 3 cents. Revenues of $112.8 million topped the consensus mark of $109.6 million. Earnings per share declined 82% year over year while revenues grew 5.6%. The company expects revenues of $111-$119 million and the bottom line to be in the range of a loss of 11 cents to earnings of 6 cents for the second quarter. For 2021, CyberArk continues to expect revenues in the range of $484-$496 million but lowered its earnings per share guidance from 45-64 cents to $39-64 cents (see: all the Technology ETFs here).

ETFs in Focus

The string of earnings beat has pushed cybersecurity ETFs higher but the recent tech rout has eroded most of the gains over the past month. Below we have highlighted the four funds in detail:

ETFMG Prime Cyber Security ETF HACK

The fund provides global exposure to the companies providing cyber security solutions that include hardware, software and services. It tracks the Prime Cyber Defense Index, holding 59 securities in its basket. The ETF is well spread out across components with the in-focus five firms accounting for combined 13.1% share. The fund has amassed $2 billion in AUM and charges 60 bps in fees per year. Volume is solid as it exchanges nearly 166,000 shares in hand per day.

First Trust NASDAQ Cybersecurity ETF CIBR

This ETF has accumulated nearly $3.5 billion in its asset base and charges 60 bps in annual fees. It trades in a good average daily volume of around 445,000 shares. The fund follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. In total, the product holds 40 stocks in its basket with the in-focus firms accounting for around 3% share each.

Global X Cybersecurity ETF BUG

This ETF offers exposure to the companies that stand to benefit from the increased adoption of cybersecurity technology and follows the Indxx Cybersecurity Index. It holds 32 stocks in its basket with the in-focus five firms accounting for more than 4% share each. The ETF has accumulated $342.7 million in its asset base and trades in an average daily volume of 141,000 shares. It charges 50 bps in annual fees (read: A Quick Guide to Cyber Security ETFs).

iShares Cybersecurity and Tech ETF IHAK

This fund provides access to companies at the forefront of cybersecurity innovation and follows the NYSE FactSet Global Cyber Security Index. Holding 43 stocks in its basket, the in-focus firms collectively account for 20.6% of the assets. IHAK has AUM of $455.9 million and charges 47 bps in fees per year. It trades in volume of 95,000 shares a day on average.

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Check Point Software Technologies Ltd. (CHKP) : Free Stock Analysis Report
 
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
 
CyberArk Software Ltd. (CYBR) : Free Stock Analysis Report
 
ET-PRM CYB SEC (HACK): ETF Research Reports
 
Proofpoint, Inc. (PFPT) : Free Stock Analysis Report
 
FireEye, Inc. (FEYE) : Free Stock Analysis Report
 
FT-NDQ CYBERSEC (CIBR): ETF Research Reports
 
ISHR-CYBSEC TEC (IHAK): ETF Research Reports
 
GLBL-X CYBRSEC (BUG): ETF Research Reports
 
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