Cybersecurity Stocks are in Vogue as Hackers Ratchet up Attacks

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Cybersecurity companies are seeing their profiles rise among investors as the scope and breadth of these attacks escalate practically on a daily basis.

The latest massive breach to occur was reported Thursday by the Office of Personnel Management (OPM), a U.S. federal agency that keeps employee information and handles security clearances. The OPM is now in the unenviable position of notifying 4 million current and past federal employees whose personal information may have been affected.

And potentially more concerning is that FOX News has learned the attack was reportedly not the kind that aims to destroy systems — it was simply an effort to covertly collect data.

Top Ten Largest Government Data Breaches | SoftwareInsider

John Bolton, former U.S. Ambassador to the U.N. who spoke on Varney & Co. on the FOX Business Network said, “There has to be a much bigger strategic analysis” on the part of the U.S. government.

Alarmingly, only 15% of cyberattacks are reported and it takes an average of 241 days after the attack has occurred, Daniel Ives, Sr. analyst at FBR Capital Markets said.

As an example, Eataly, a high-end Italian food market/mall chain announced today that criminals hacked its network system and installed a malware designed to capture payment card transaction data. Customers who made payment card purchases at its location on 5th Avenue in New York during the first few months of 2015 may have been impacted.

Given the proliferation of incidents, it’s hardly surprising that investors are starting to put their money into cybersecurity stocks.

Data Breaches Over Time | SoftwareInsider

“There are a handful of nextgen companies that have really skated to where the puck was going, such as Fireye (FEYE),” said Ives. He coins Fireye the “navy seals” of cybersecurity, as they are usually the first to call when trying to prevent attacks and installing nextgen software to prevent future issues.

And Ives likens Palo Alto Networks (PANW) to a one-stop shop for cybersecurity needs.

Cybersecurity stocks were building on their premarket gains on Friday. Shares of Palo Alto are hitting an all-time high, trading up over $173.50 a share. And so is the ETF that tracks the group, the PureFunds ISE Cybersecurity ETF, whose ticker is HACK.

So how long before these companies start acquiring and getting acquired?

“That is the $64 thousand dollar question,” says Ives. He said he would be shocked if there weren’t any major M&A in the space over the next six to twelve months. “A lot of the larger IT companies such as Oracle (ORCL), Microsoft (MSFT) and Cisco (CSCO) are likely to be in play,” Ives said.

He said the government needs to be more proactive against these serious hack attacks. But how worried should we be?

Bolton opined: “If I were a terrorist organization or an adversary of the U.S., I would be looking for things to do. These attacks could cause enormous disruption as we become more integrated in terms of communication and information technology. Unless we think about this and talk about this strategically as a country, we are just simply at greater risk every day.”

Follow Matthew Morrow on Twitter @mattmorr46.

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