Business Corpus: Cybersecurity Stocks: Many Are Hot But The Buyer Should BewareAt first glance, cybersecurity seems to be on fire with lots of prospect for growth, but you still have to be careful picking stocks in this sector. Earnings show that investors favor some cybersecurity names over others. The post Cybersecurity Stocks: Many Are Hot But The Buyer Should Beware appeared first on Investor's Business Daily.

[Collection]

The performance of cybersecurity stocks in the current round of earnings reports offers insight on this seemingly hot tech sector — and why the investor should beware.

At first glance, cybersecurity seems to be on fire with lots of prospects for growth, but you still have to be careful picking stocks in this sector. Earnings show that investors favor some cybersecurity names over others.

In other words, it's not a rising tide that lifts all boats.

The results for June-quarter winners thus far have been alluring. Fortinet (FTNT) stock soared by more than 14% the day after its Aug. 1 earnings. Rapid 7 (RPD) climbed nearly 9% after reporting Monday. CyberArk Software (CYBR) jumped 11% off Tuesday's results. And SailPoint Technologies (SAIL) catapulted 13% a day after Wednesday's report.

When the losers fell, though, they fell hard. Proofpoint (PFPT) tumbled more than 7% a day after its July 26 report. Already struggling Symantec (SYMC) dropped nearly 8% on its Aug. 2 earnings. And Carbon Black (CBLK) plunged more than 10% off Tuesday's report. FireEye (FEYE) managed to confine its loss to less than 2% off its Aug. 1 results, but only because it finished at the high end of the next day's trading.

The troubles for some continued into Friday's action. ForeScout Technologies (FSCT) plunged by double digits at one point on the stock market today. Mimecast (MIME) fell more than 6% at one point, but recovered to near break-even territory Friday, despite a 300% gain in earnings per share. Palo Alto Networks (PANW) and Okta (OKTA) have yet to be heard from, as they both report Sept. 6.

High Ranking

IBD's Computer-Software Security group is ranked No. 9 out of 197 industry groups. Fortinet, Palo Alto, Qualys (QLYS) and CyberArk have the highest Composite Ratings in the security software group as earnings reports continue to roll in.

Picking the right industry group to watch is often one key to finding winning stocks. But any group has a mix of companies that aren't necessarily direct competitors.

In the case of IBD's Computer-Software Security group, there is a wide range of products and services sold by companies. Some cybersecurity firms still sell hardware appliances while others have shifted to cloud computing platforms. And market forecasts are different for those products.

Take Palo Alto and Fortinet. Both compete in the corporate "firewall" security market vs. Cisco Systems (CSCO), Check Point Software Technologies (CHKP) and others. Firewalls are located between private networks and the internet, and they block unauthorized traffic.

This year is shaping up to be the start of an upgrade cycle, with companies buying next-generation firewall products. And Fortinet has been gaining market share vs. Check Point, analysts say.

Artificial Intelligence Ups Endpoint Competition

Hackers often aim to compromise networks by targeting employees or management with administrative access to company computer systems. CyberArk's software monitors and manages privileged accounts. SailPoint, meanwhile, sells identity management software that helps companies monitor security breaches.

Rapid 7 sells cloud-based software services to businesses to protect them against security attacks.

Some cybersecurity markets are growing at a healthy rate but they're crowded, with startups battling incumbents. That seems be the case with "endpoint" software makers Symantec and Carbon Black, analysts say.

Startups using artificial intelligence tools, including Cylance and CrowdStrike, operate in the endpoint market — detecting malware on laptops, mobile phones and other devices that access corporate networks. IDC forecasts the endpoint cybersecurity market will grow to $12.5 billion in 2021, up from $9.6 billion in 2016.

YOU MAY ALSO BE INTERESTED IN:

AI Companies Race To Get Upper Hand In Cybersecurity — Before Hackers Do

Five Things To Mull In Taking Profits Or Going Long On Cybersecurity

Google & Facebook Vs. Amazon & AT&T: The Digital Ad Showdown Begins

Sell And Take Profits Or Hold? Here Are Several Guidelines To Follow

Chart-Reading Basics: How A Buy Point Marks A Time Of Real Opportunity

The post Cybersecurity Stocks: Many Are Hot But The Buyer Should Beware appeared first on Investor's Business Daily.