Kaseya’s attack increases the prospects for cybersecurity stocks. Here are a few to consider.

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Last weekend’s large-scale cyber attack on security software vendor Kaseya revealed what some analysts say is a growing and evolving threat, raising their expectations of cybersecurity spending to the benefit of industry stocks.

Increasingly, cybercrime tends to target service providers and supply chains because hackers know they can affect a large group of people with a single attack. Last weekend’s $ 70 million ransomware attack, which struck between 800 and 1,500 businesses that used Kaseya’s services, is the latest sophisticated cyberattack after the Colonial Pipeline hack attack last month.

Irvin Liu, analyst at equity research firm Evercore ISI, says such breaches are likely to become more common as information technology moves to the cloud and to adapt to hybrid work, among others. . These changes introduce “a greater number of potential attack surfaces for threat actors to target,” he says. “As a result, we expect security spending to continue increasing a percentage of total IT spending. “

Spending on information security and risk management technologies set to increase 12.4% in 2021 to $ 150.4 billion, research firm says

Gartner.

Typically, however, only a small portion of an enterprise’s IT budget is allocated to security spending. Research by Raymond James, for example, shows that security spending accounts for just 4% of IT budgets across all industries.

That leaves room for growth, and security software analysts at Raymond James believe the breach could boost prospects for people like

Fortinet

(ticker: FTNT),

Palo Alto Networks

(PANW),

Octa

(OKTA), and

Fast7

(RPD). He rates everyone as outperforming.

Raymond James analysts believe the attack will not only boost security spending on traditional products, but “is also expected to result in transformation spending on new ones. [cybersecurity] solutions. “

Evercore, for its part, agrees that ransomware and other breaches should “provide favorable winds to security providers with products / solutions that directly attack ransomware.” Besides Palo Alto Networks and Fortinet, Evercore analysts appreciate some of the security solutions provided by

Checkpoint software technologies

(CHKP) and

Cisco Systems

(CSCO).

One way to invest in a cybersecurity boom would be through one of the many industry-focused exchange-traded funds. the

First Trust Nasdaq Cyber ​​Security ETF

(CIBR), for example, was recently trading around $ 48, up 8% year-to-date, and the

ETFMG Prime Cyber ​​Security ETF

(HACK) was recently around $ 61.50, up 7.2% year-to-date. Both are nearing their 52-week highs.

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Cybersecurity companies are already in high demand.

CrowdStrike Holdings

(CRWD), one of the largest IT security companies by market capitalization, saw its stock increase 25% year-to-date and posted a strong performance in the first quarter, beating earnings estimates and income. Company CEO George Kurtz emphasizes that increased attention to cybersecurity needs to start at the board level as well as in audit committees. “It’s a very specialized field and there isn’t one security company that can do it all,” he said.

Experts attribute the Kaseya attack to Russian ransomware group REvil, which was previously linked to the $ 11 million ransomware attack on meat producer JBS (JBSAY). This most recent incident comes at a particularly high price, at $ 70 million, and is said to be the most expensive ransomware attack to date, nearly doubling the record $ 40 million paid by

CNA Financial

(ANC) in March.

Kaseya supplies computer software to small and medium-sized businesses, and the attack was carried out through what appeared to be a routine software update that compromised Kaseya’s VSA software.

With so many people working from home during Covid, cybercriminals are now targeting middle players such as managed service providers who help manage technology for many terminal businesses ranging from mom-and-pop stores to national grocery chains. .

“The attacker effectively levels the security and business operations of many organizations with a single blow to a single company,” said Derek Manky, head of security analytics and global threat alliances at Fortinet’s FortiGuard Labs, in an email.

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