Cybersecurity Industry In 2021: The Complete Investors Guide

Cybersecurity Industry Size and Prospects

Given the importance and depth of the cybersecurity field, it’s not surprising that overall spending has increased from $3.5 billion in 2004 to $185 billion in 2020. According to Grandview Research, spending is expected to increase at a 12% to 15% CAGR over the next decade

In a survey from Ernst & Young, 86% of companies said that upgrading cybersecurity is a priority for them in 2021. Cybersecurity and national defense are also becoming synonymous, as cyberwarfare and spyware are increasingly taking place in cyberspace. In 2020, the Defense Department spent $24 billion on cybersecurity, and this is expected to reach $50 billion by 2030. 

Over the next decade, technologies like cloud computing, 5G, and the Internet of Things (IoT) will continue to proliferate and become ubiquitous. This will begin the era of “always connected” devices. The counter to this innovation will be that our increased dependence on these devices will increase the cost of cybersecurity attacks.

5 Stocks to Buy

Cybersecurity is a complex field with multiple layers. Companies, governments, and individuals have to protect themselves from threats that could come in many forms. Of course, these threats are getting increasingly sophisticated. Technology’s incursion into various aspects of life for individuals and businesses is unstoppable. There are several benefits, but the major downside is increased risk and exposure to cyberattacks. In a sense, the cybersecurity industry is the “insurance” that must be bought to protect against these risks.

The costs of any disruption will only increase as more data, activities, services, and operations are performed on the cloud. Of course, it’s expected that criminals will follow the money. McAfee (MCFE), Radware (RDWR), Qualys (QLYS), Proofpoint (PFPT), and NortonLifeLock (NLOK) are five stocks that will benefit as cybersecurity spending increases. 

McAfee Corp. (MCFE)

MCFE is one of the oldest and most well-known cybersecurity companies. It was founded in 1987 and was bought out by Intel (INTC) in 2010 for $7.7 billion. However, the merger was not successful, and Intel ended up selling MCFE to a consortium of private equity investors at a loss. 

In October 2020, MCFE once again became a public company, as it IPO’d at $19. Since then, the stock has traded between $16 and $22. However given its long history, MCFE is very different from most IPOs, as it has a mature business that is profitable and cash-flow positive.

MCFE has two major units – one to serve individuals, while the other serves enterprise customers. Currently, there is an even split between the two, but the enterprise segment is growing faster. For both segments, MCFE offers subscription-based products that include additional add-ons.

For enterprise customers, MCFE specializes in endpoint security, which means protecting devices connected to a network. In this segment, its major competitors include FireEye (FEYE), VMWare (VMW), and CrowdStrike (CRWD). MCFE is also considered one of the leaders in cloud security, according to Gartner. It counts 81 companies out of the Fortune 100 as customers. 

Overall, it has a 9% total share of the cybersecurity market, which makes it one of the best vehicles for investors to get exposure to this theme, especially as the stock is trading at a much cheaper valuation than other companies in the sector.

MCFE is rated a B by the POWR Ratings, which equates to a Buy. The stock has a B for Growth. This isn’t surprising as it is one of the leading companies in a fast-growing sector. As hackers get more sophisticated and the cost of breaches increases, more people will buy McAfee’s total security package. Its enterprise segment is growing even faster and offers cloud and network security. 

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