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Summary List PlacementCybersecurity spending is predicted to grow by more than 12% in 2021, pushing total annual spending in the sector to a record $150.4 billion, according to the latest forecast from Gartner. That's compared to a 6.4% increase in cybersecurity spending in 2020.
From governments to banking giants, there has been a renewed focus on cybersecurity in the past year, but the trend has been around for some time.
Take Bank of America for example. In a June 14 interview with CNBC, Bank of America CEO Brian Moynihan said that his company has massively increased cybersecurity spending over the past decade.
"I became CEO eleven and a half years ago, and we probably spent $300 to $400 million [per year], and now we have over a billion," Moynihan said.
The growing focus on cybersecurity is a result of a number of catalysts — the most obvious of which are the recent, highly publicized cyberattacks in the US.
The Colonial Pipeline cyberattack from the ransomware group DarkSide temporarily took down a pipeline that carries 45% of the East Coast's fuel, causing widespread gas shortages. And the SolarWinds cyberattack exposed sensitive data from companies like Microsoft and top government agencies while going undetected for months.
According to Dan Ives, a senior equity research analyst covering tech at Wedbush, these cyberattacks were two of the biggest hacks in history—and they have changed the way many companies are looking at cybersecurity.
In an interview with Insider, Wedbush's top tech analyst said the Colonial Pipeline and SolarWinds attacks were a "wake-up call" for governments and businesses around the world.
Ives sees cybersecurity spending more than doubling from roughly 5% of budgets to between 10% and 15% over the next year.
Recent cyber-attacks aren't the only catalysts for growth in the cybersecurity industry, however. According to Ives, the rapid expansion of cloud workloads is set to boost cybersecurity stocks as the sector's growth exposes key vulnerabilities.
The analyst said only 40% of companies' workloads is currently on the cloud, and that figure is poised to hit 70% by 2025, meaning more sensitive information for the largest companies in the world to protect — and more opportunity for cloud security companies.
On top of that, federal spending will help boost cybersecurity companies over the coming years to counter what Ives calls "cyber warfare" out of China and Russia. The analyst said the number of nation-state cyberattacks continues to grow and that the Biden administration is finally set to bring out some of what he believes is overdue spending to help correct the issue.
President Biden announced $10 billion in federal spending on cybersecurity and IT infrastructure as a part of his massive $1.9 trillion rescue package released in January.
"The Biden administration is laser-focused on this troubling trend of cyberattacks and should catalyze more spending on the federal front," Ives said.
Ives also believes mergers and acquisitions in the cybersecurity space are set to accelerate and will act as yet another catalyst for stocks in the sector. On top of that, cryptocurrencies' rise has also accelerated financial incentives for hackers in the space, according to the analyst.
At the end of the day, Ives said there is a $200 billion growth opportunity in cloud security alone that is up for grabs over the next few years.
So how do investors take advantage of the trend? Wedbush's top tech analyst recommended playing cybersecurity with a "basket approach," picking a few of the top names in the sector and sticking with them as they fight for this historic $200 billion growth opportunity. However, for investors looking to be more selective, Ives said Zscaler remains his top choice in cybersecurity.
Below, Insider compiled a list of some of Wedbushs' top cybersecurity picks. Ives said all of these stocks have "unique footprints where they are seeing strong demand given where spending is." Also included are the stocks' tickers, price targets, and the upside to those targets as of June 23 closing prices.
1. ZscalerMarkets InsiderTicker: ZS
Price Target: $240
Upside to Price Target: 10%
Source: Wedbush Securities
2. SailPoint TechnologiesMarkets Insider
Ticker: SAIL
Price Target: $70
Upside to Price Target: 33%
Source: Wedbush Securities
3. QualysMarkets Insider
Ticker: QLYS
Price Target: $130
Upside to Price Target: 27%
Source: Wedbush Securities
4. Tenable HoldingsMarkets Insider
Ticker: TENB
Price Target: $62
Upside to Price Target: 40%
Source: Wedbush Securities
5. CyberArk SoftwareMarkets Insider
Ticker: CYBR
Price Target: $150
Upside to Price Target: 10%
Source: Wedbush Securities
See the rest of the story at Business Insider
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