Cybersecurity Stocks Often Make Investors Wanna Cry -- Heard on the Street

By Dan Gallagher Features Dow Jones Newswires

Cybersecurity investors would do well to remember that buying on the bad news isn't typically the safest play.

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Several security stocks got a strong boost Monday following the huge malware attack dubbed "WannaCry" that circled the globe over the weekend. Proofpoint Inc. and FireEye Inc. each had jumped 9% by Monday afternoon, while Palo Alto Networks, Fortinet Inc. and Symantec Corp. each gained about 3%. Cisco Systems Inc., which now generates more than $2 billion a year in revenue from its security business, was also up nearly 3%.

It isn't the first time a high-profile attack has spurred speculation. But security spending is already a high priority for corporate executives, so the shock value of such episodes generally doesn't alter budgets in a significant way.

The threat is growing, of course. The number of successful hacks or malware infections on businesses and other organizations by outside parties totaled 300 last year compared with 129 the year before, according to the Privacy Rights Clearinghouse. Before the weekend, more than 100 such attacks had been logged this year

Yet the sharp rise in cyberattacks over the past two years hasn't translated into strong returns for investors. Of the stocks mentioned above, only Proofpoint and Symantec have outperformed the Nasdaq Composite in that time. Proofpoint provides email security, and likely would benefit most from increased spending in this area given that email is the most common means of entry for malware. But it also trades around 137 times forward earnings, which is a fairly high price to command in a sector that hasn't always given investors what they have paid for.

Write to Dan Gallagher at dan.gallagher@wsj.com

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(END) Dow Jones Newswires

May 15, 2017 15:59 ET (19:59 GMT)