Shares of Mimecast Limited (MIME), U.K.-based email security and cyber resilience company, have gained 13.2% in price over the past week based on investors’ optimism over its inclusion in the SPDR S&P Mid Cap 400 ETF Trust (MDY). Although MIME’s product portfolio is sufficiently advanced to provide comprehensive security coverage for Microsoft Corporation’s (MSFT) Office 365 cloud email, three of MIME’s systems suffered breaches during the January 2021 attack and potentially exfiltrated certain encrypted service account credentials created by customers.
Furthermore, insiders at MIME have sold $1.1 million of stock over the past 12 months. This, combined with its overvaluation, might lead to price decline in the near term. MIME’s 7.69x forward Price/Sales is 85.9% higher than the 4.13x industry average.
However, because the need for cybersecurity solutions is rising with the increasing use of cloud platforms for remote working and ongoing digital transformation, the cybersecurity industry should witness solid growth. Organizations worldwide are spending heavily on cybersecurity solutions to protect critical data. The global cybersecurity market size is expected to grow at a 9.7% CAGR to $345.4 billion by 2026.
Given this backdrop, we believe it could be wise to invest in fundamentally sound cybersecurity stocks NortonLifeLock Inc. (NLOK), Trend Micro Incorporated (TMICY), and Radware Ltd. (RDWR) that are better positioned to capitalize on the industry tailwinds than MIME in the near term.
Click here to checkout our Cybersecurity Industry Report for 2021
NortonLifeLock Inc. (NLOK)
NLOK is a Mountain View, Calif.-based software company that provides cyber security solutions to consumers worldwide. Its products and services enable users to protect their devices, online privacy, identity, and home networks. NLOK sells its products and related services through retailers, telecom service providers, hardware OEMs, and e-commerce platforms.
On August 10, 2021, Avast PLC, a cybersecurity software company, announced an agreement to merge with NLOK to create a new, industry-leading consumer Cyber Safety business, leveraging the established brands, technology, and innovation of both groups. Amid growing global cyber threats, NLOK hopes to provide holistic cyber protection for consumers worldwide.
On the same day, NLOK introduced new features to its Norton Family that provide an easy, safe, and secure way for parents to supervise their children with location-based boundaries and alerts remotely. Now that schools are reopening, NLOK’s offering of parental controls and safety measures will help parents stay informed of their childrens’ whereabouts as they spend more time outside the home.
NLOK’s net revenues for its fiscal first quarter, ended July 2, 2021, increased 11.7% year-over-year to $686 million. The company’s gross profit came in at $584 million, up 10.6% from the prior-year period. Its non-GAAP operating income was $354 million, representing a 22.5% year-over-year rise. NLOK’s non-GAAP net income came in at $248 million, up 31.9% from the prior-year period. Its non-GAAP EPS was 0.42, representing a 35.5% year-over-year improvement. The company had $1.23 billion in cash and cash equivalents as of July 2, 2021.
For the current quarter, ending September 30, 2021, analysts expect NLOK’s EPS to improve 16.7% year-over-year to $0.42. Its revenue is expected to be $695.36 million, representing an 11.1% year-over-year rise. It surpassed the consensus EPS estimates in each of the trailing four quarters Also, the stock’s EPS is expected to grow at a 14.5% rate per annum over the next five years.
The stock has gained 47% over the past nine months and 7.9% over the past month. It closed yesterday’s trading session at $26.79.
NLOK’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an A grade for Quality, and a B grade for Value. Of the 26 stocks in the Software – Security industry, it is ranked #4. Click here to see the additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for NLOK.
Trend Micro Incorporated (TMICY)
TMICY is a Japan-based company that develops and sells computer security products, as well as related services. The company provides user protection solutions comprising endpoint security, email, web security, endpoint and gateway suites, SaaS application security, endpoint detection and response, and support services.
TMICY reported increased momentum as Amazon.com, Inc.’s (AMZN) Amazon Web Services (AWS) Advanced Technology Partner. TMICY continues to be a primary security platform sold in AWS Marketplace, witnessing a 63% growth in annual recurring revenue in AWS Marketplace.
On July 7, 2021, TMICY announced a new collaboration with Microsoft Corporation (MSFT) to develop cloud-based cybersecurity solutions on Microsoft Azure and generate co-selling opportunities. By leveraging Azure’s cloud computing platform and TMICY’s expensive security expertise, both companies are looking forward to better protection against cyber threats and to helping organizations transform digitally.
TMICY’s net sales increased 12.1% year-over-year to $426.76 million in its fiscal second quarter, ended June 30, 2021. The company’s pre-tax income came in at $96.94 million, representing a 27.7% year-over-year rise. Its net income was $70.31 million for the quarter, up 22.9% from the prior-year period. As of June 30, 2021, the company had ¥196.74 billion ($1.79 billion) in cash and cash equivalents. For the current quarter, ending September 30, 2021, TMICY’s revenue is expected to grow 2.4% year-over-year to $420.79 million. The stock has gained 11.6% in price over the past six months and 3.5% over the past month. It ended yesterday’s trading session at $54.26.
TMICY’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
The stock has an A grade for Stability and Quality, and a B grade for Value. It is ranked #2 in the Software – Security industry. Click here to see the additional POWR Ratings for TMICY (Growth, Sentiment, and Momentum).
Radware Ltd. (RDWR)
Headquartered in Tel Aviv, Israel, RDWR provides cyber security and application delivery solutions for virtual, cloud, and software-defined data centers worldwide. The company sells its products primarily to independent distributors, including value-added resellers, original equipment manufacturers, and system integrators.
On Aug. 3, RDWR partnered with Internap Corporation (INAP), RDWR’s premier partner that is a global provider of performance-driven, secure hybrid infrastructure solutions. With the rapid shift to the cloud and a growing number of sophisticated cyberattacks, INAP’s plans to deploy RDWR’s Cloud WAF and DDoS Protection Services to offer organizations more service availability and application security. This should help RDWR gain further market reach.
On June 30, RDWR and Acantho, Italy-based Hera Group’s telecommunications subsidiary, expanded their partnership to provide cloud web application security protection to enterprise customers in Italy. Acantho upgraded its infrastructure with RDWR’s Hybrid DDoS Attack Protection and will offer RDWR’s Cloud WAF service to enterprises for enhanced quality of service and application security. Because web applications are becoming increasingly vulnerable, exposing enterprises to the risk of data breaches and financial loss, the deployment of RDWR’s security solutions to address these threats will create more demand in the coming months.
For its fiscal second quarter, ended June 30, 2021, RDWR’s revenues increased 19.2% year-over-year to $69.67 million. The company’s non-GAAP gross profit came in at $57.35 million, up 18.5% from the prior-year period. RDWR’s non-GAAP operating income was $8.76 million for the quarter, representing a 106.1% year-over-year improvement. While its non-GAAP net income increased 48.4% year-over-year to $8.89 million, its EPS increased 46.2% to $0.19. RDWR had $61.06 million in cash and cash equivalents as of June 30, 2021.
RDWR’s revenue is expected to come in at $70.85 million in the current quarter, ending September 30, 2021, representing a 13.3% year-over-year rise. The company’s EPS is expected to increase 5.6% year-over-year to $0.19 in the current quarter. It surpassed the Street’s EPS estimates in three of the trailing four quarters. RDWR’s EPS is expected to grow at a 21% rate per annum over the next five years.
The stock has gained 35.6% in price over the past nine months and 6.1% over the past month. It ended yesterday’s trading session at $34.19.
It’s no surprise that RDWR has an overall B rating, which equates to a Buy in our proprietary rating system. The stock has an A grade for Quality, and a B grade for Stability and Growth.
RDWR is ranked #1 in the Software – Security Industry. Click here to see the additional POWR Ratings for RDWR’s Sentiment, Momentum, and Value as well.
Click here to checkout our Cybersecurity Industry Report for 2021
NLOK shares were trading at $26.59 per share on Tuesday afternoon, down $0.20 (-0.75%). Year-to-date, NLOK has gained 29.93%, versus a 21.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More…
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