4 Different Ways To Invest In Cybersecurity

• While shares of Check Point Software Technologies Ltd. CHKP and FireEye Inc FEYE are down since April 10, shares of Fortinet Inc FTNT and Palo Alto Networks Inc PANW are up.
• Gabelli & Company’s Hendi Susanto has Buy ratings on Check Point and Fortinet, and Hold ratings on FireEye and Palo Alto Networks.

Consolidated Solution

Analyst Hendi Susanto maintained a Buy rating on Check Point. Check Point has an extensive portfolio of products and services focused on protection, rather than not detection. The company is “positioning its consolidated solution as one of its competitive edges.”

Susanto believes that the largest growth opportunity for Check Point is mobile security, which is a space that has not being fully addressed. Although the company continues to invest in endpoint security, mobile security represents “a bigger opportunity and a higher investment priority.”

In the report Gabelli & Company, “Check Point Software is a network security market leader with the most attractive valuation. It has high profitability, large customer base and ecosystem of partners and distributors.”

Threat Management: From Detection To Response

Susanto downgraded the rating on FireEye from Sell to Hold, following a massive pullback in shares. The company aspires to become the leader in threat management in everything from detection to threat response.

The analyst believes that FireEye has made “a smart strategic move” by raising convertible notes worth $800 million.

“We believe FireEye’s high billings growth can command a premium valuation while the company is still generating losses...We see the ability to reach a positive free cash flow as the first milestone that FireEye must achieve on its way toward profitability,” the Gabelli & Company report stated.

Number One In Overall Network Security Units

Analyst Hendi Susanto maintained a Buy rating on Fortinet. The company indicated that it has a leading position in the overall network security units and the number two position in the global data center firewall.

Fortinet is aiming at expanding its presence in enterprise customers as well as to pursuing “emerging opportunities in internal specification firewalls where data traffic can be ten times as fast.”

While saying that Fortinet has a high growth profile, the analyst wrote, “We believe there are potential margin expansion opportunities as Fortinet is still investing heavily in sales and marketing. We favor Fortinet’s diversified product portfolio, diversified customer groups, and strengths in Unified Threat Management.”

Variety OF Security Solutions

Gabelli & Company maintained a Hold rating on Palo Alto Networks. The company believes that the current positive security spending environment is a multi-year opportunity.

Susanto mentioned that Palo Alto Networks had reported strength across all product lines in FY4Q15, while also generating robust sales growth in the Americas and Asia Pacific.

The company has indicates that its free cash flow margins could be 5-8 percent higher than its target operating margin range of 22-25 percent by FY4Q16. It has also projected free cash flow margin of more than 30 percent for FY16, driven by high sales growth and growth in its subscription business.

The analyst said, “We are maintaining our Hold recommendation based on our conservative valuation and margin of safety consideration.”