What Will Likely Drive Cybersecurity Growth in 2016?
What has impacted cybersecurity in 2016?
In our recent Symantec series, we discussed the interest and funding that the cybersecurity space attracted. However, 2016 hasn’t been very kind to network security and cybersecurity companies. It’s important to note that 2015 was a better year. The sector’s popularity rose due to high-profile and prominent cyberattacks. Currently, the overall market is reeling from several issues like falling crude oil prices. The prices are at a 12-year low due to the weak global demand outlook and a slowdown in global growth. At the same time, the scrutiny on the cybersecurity space as an investment increased.
According to Michael Ball, the president and lead portfolio manager of Weatherstone Capital Management, “Since there’s a shorter track record for the cyber-security firms, people have become more hesitant.” To date, 2016 has been a quiet year as far as prominent cyberattacks are concerned. This added to woes for cybersecurity companies.
Also, reduced spending on enterprise software led to a fall in security software companies’ stocks.
Tableau Software and LinkedIn’s weak guidance
In the first week of February 2016, most cybersecurity stocks such as Fortinet (FTNT), Palo Alto Networks (PANW), FireEye (FEYE), CyberArk (CYBR), and Proofpoint (PFPT) fell considerably. All of these companies’ share prices fell by 7%–13%.
Tableau Software (DATA) released its 4Q15 earnings on February 4. It reported weak earnings and outlook for 2016 due to a slowdown in customer spending. This news created a ripple effect. It was instrumental in cybersecurity stocks’ fall. LinkedIn (LNKD) also issued weaker-than-expected guidance for 2016. This caused its shares to fall by ~44%. This exacerbated the downfall in tech and cybersecurity stocks.
Investors who want to gain exposure to the cybersecurity space can consider investing in the PureFunds ISE Cyber Security ETF (HACK).
Browse this series on Market Realist: