For about three years, cybersecurity spending has been in a “super cycle,” UBS’s Brent Thill said in a report. The analyst added, however, that the 1H16 earnings and “our ongoing field work” indicate that the phase of “indiscriminate budget allocations” may be over.

Takeaways

Thill mentioned that the group’s earnings and channel checks indicate:

Subscription-Based Consumption

“Appliance fatigue and appetite for software-first architectures have upended most enterprice IT purchasing and cybersecurity is no longer an exception. While the risk of lower product revs is plapably high, this is likely to be felt across the security category, and which we don’t view as a demand depressant nor a vendor specific issue, but an industry-wide phenomenon for bundled software features,” Thill wrote.

Recommendations

Thill considers Symantec as the best 2H16 stock with limited downside, renewed leadership and strategic direction, Fortinet as a favored mid-cap GARP play with potential activist involvement and Palo Alto as a good long-term company, but likely soft Q3 results and tough comps in the near term.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email [email protected] with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!