Demand For Cybersecurity Investments Is Still 'White Hot'

• Shares of Cybersecurity leaders were mostly down last week, with many suffering double-digit percentage declines.
• FBR’s Daniel Ives maintained his Overweight stance on the group.
• Ives pointed said that it had been another robust earnings season for cybersecurity players, while 3Q had strong deal momentum with customers upgrading to next-gen security platforms and software.

Analyst Daniel Ives said that following another strong earnings season for cybersecurity companies, recent field checks had indicated “white hot” deal momentum in 3Q, with both enterprise customers and governments upgrading to next-generation security platforms and software.

“Based on our conversations with channel partners/customers, closure rates look to be trending higher both QOQ and YOY with seven-figure deals markedly up in the pipeline. This speaks to the massive firewall refresh that is underway, with hot areas of security (advanced persistent threats, next-generation firewall, email security, mobile/cloud) as the main beneficiaries,” Ives wrote.

FBR has an Outperform rating on security leaders, such as Palo Alto Networks Inc (NYSE: PANW), FireEye Inc (NASDAQ: FEYE), Fortinet Inc (NASDAQ: FTNT), Proofpoint Inc (NASDAQ: PFPT) and Check Point Software Technologies Ltd. (NASDAQ: CHKP). These companies are “at the forefront” of the next-gen security market, which is estimated to grow by around 30 percent in 2015, and the security leaders “should disproportionately benefit” from the growth.

“While market jitters have caused a "multiple battle on the Street," next-generation cybersecurity spending appears strong thus far in 3Q with robust growth potential heading into year-end/FY16, as the spotlight on these technologies is accelerating focus on protecting the enterprise/cloud/big data and leading CIOs to spend in this all-important area of IT,” Ives said.