Wedbush Rolls Out Coverage On 2 Cybersecurity Concerns

With total spending on data security expected to grow 8 percent annually to $98 billion in three years, an analyst launched coverage Wednesday on two of the sector's significant players. Wedbush's Steve Koenig offered Buy ratings on both FireEye Inc (NASDAQ: FEYE) and the smaller Proofpoint Inc (NASDAQ: PFPT).Koenig's FireEye price target of $63 and his Proofpoint target of $79 suggests share appreciation from current levels of about 24 percent and 21 percent respectively.Neither company is profitable, but both present fast-growing revenue.A series of well-publicized security breaches in recent months have "opened people's eyes" to the threat of cybercrime, according to Koenig.But customers "can't and won't spend unlimited amounts of money on cybersecurity" according to the analyst. "Best-of-breed vendors" will win out with products that offer the "most effective combination of cost and risk reduction," Koenig said.FireEye shares have gained about 60 percent since December, giving it a market capitalization of about $8.26 billion.Koenig said its revenue growth will slow to 41 percent next year, from about 50 percent currently, while investor skepticism regarding its high spending on sales and marketing "should abate" as FireEye moves toward profitability.FireEye is expected to post 2015 revenue of about $631 million.Proofpoint is "an emerging leader" in email security according to Koenig, with an 8 percent share of the market. Proofpoint's revenue grew 42 percent in 2014 to $196 million. Its shares are up nearly 35 percent in the year to date, giving it a market cap of about $2.64 billion.Proofpoint's consistently conservative guidance creates "a highly probable beat and raise pattern," said Koenig, who expects to see Proofpoint profits late next year.