Oppenheimer backs Check Point and cybersecurity sector

Gil Shwed Photo: Reuters
Gil Shwed Photo: Reuters

Oppenheimer anslyst Shaul Eyal sees companies engaged in cybersecurity like Check Point and Cyberark enjoying even better returns in 2018.

Check Point Software Technologies Ltd. (Nasdaq: CHKP), Amdocs Ltd. (Nasdaq: DOX), and CyberArk Software Inc.(Nasdaq:CYBR) are among the software (information security and communications infrastructure) shares recommended by the Oppenheimer investment house for 2018. The investment bank's economists believe that in the short term, there are a number of engines that will support the growth trends in the sector, including cloud computing, big data and analytics, the Internet of Things (IoT), and artificial intelligence (AI). Analyst Shaul Eyal says that companies engaging in these sectors will have better returns in 2018. "We expect the coming into effect of new regulations, such as the standard for protection of general information in the European Union in May 2018, to highlight the need for more cyber security capabilities to counter today's difficult threats," he writes.

Eyal cites a number of leading technological trends. The first is the growth in cloud computing, including a 26.5% increase in spending on software as a service (SaaS). The second is cyber security, about which he says, "The environment remains threatening and unpredictable, and high-profile attacks will continue making headlines in 2018… Cyber security entrepreneurs believe that the unemployment rate among employees in this field is zero, and the demand for specialists will continue growing." A third trend is automation aimed at improving productivity, precision, and efficiency. In the context of AI, Eyal writes, "AI technologies are in a strong position to generate great value in the cyber security market, as well as in the general market of software infrastructure."

The fourth trend is blockchain, currently a buzz word. According to Eyal, however, blockchain is a concept that can be implemented in a broad range of technologies, including cyber security, logistics, etc. Eyal says that the risks in investing in these shares in 2018 include uncertainty about the new US tax plan, the macroeconomic effects of existing geopolitical risks, and technological progress making the existing supply obsolete.

"Palo Alto is maintaining its status as a supplier of innovation"

Oppenheimer lists 17 recommended technology shares, half of which are either Israeli companies or companies with an affinity for Israel. The recommended large cap companies (over $10 billion market cap) Check Point and Palo Alto Networks, the recommended middle cap companies ($4-10 billion market cap) include include Amdocs and NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE), and the small-cap companies (market cap less than $4 billion) includes CyberArk, Imperva Inc. (NYSE: IMPV), Varonis Systems Inc. (Nasdaq: VRNS), and Verint Systems Inc. (Nasdaq: VRNT). In his comments about Check Point, managed by CEO Gil Shwed, the analyst writes that the company is "showing strong and consistent growth in revenue from subscribers, and we expect the trend to continue in 2018." He mentions that Check Point expanded its marketing and sales team in 2017. Palo Alto, the competitor founded by ex-Check Point employee Nir Zuk, is also recommended; Eyal writes that that it is maintaining its standing as a supplier of innovation, and is likely to also report strong performances in 2018. Amdocs, managed by CEO Eli Gelman, provides IT solutions and systems for communications companies, and Eyal says that the company is in a good position to leverage multi-billion-dollar potential opportunities in network function virtualization (NFV) and open network automation platforms (ONAP). Although the product cycle is at an early stage, the company is already closing deals. "Amdocs's stable model offers a safe harbor against volatility," he adds.

Writing about NICE Systems, a provider of solutions for managing customer relations and risks, which is managed by CEO Barak Eilam, Eyal says that the company sold assets that were not part of its core business and launched a cloud platform that is a significant milestone in the company's strategy.

Another Israeli cyber security company recommended by Oppenheimer is CyberArk, managed by CEO Udi Mokady. Eyal writes that CyberArk is maintaining its unique competitive position in the management of preferred accounts in in an enterprise, and is likely to enjoy strong demand in 2018. Eyal believes that Imperva, another company in the sector, founded by Shlomo Kramer, is in a good position in database and web security. Eyal says that the company is likely to present strong performances in 2018, thanks to its competitive position and the strong trends in the cyber market. Varonis, another cyber security company, provides enterprises with solutions for managing sensitive information.

According to Eyal, the company is in a good technological and operational position to continue outperforming the market in 2018. Verint, which provides business and security intelligence systems and services, is also expected to benefit from positive trends in its markets. Eyal notes, "The renewal of growth in revenue from intelligence and cyber will lead to growth in Verint's revenue and profit margins."

Published by Globes [online], Israel Business News - www.globes-online.com - on January 15, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Gil Shwed Photo: Reuters
Gil Shwed Photo: Reuters
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