Wedbush bullish on cyber security going into Q1 earnings, as Street 'underestimating' growth
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Wedbush Securities is bullish on a number of cyber security companies going into first-quarter earnings, raising the price targets on several names, as the firm believes the rest of Wall Street is "underestimating" the growth for the sector for the rest of the year.
Analyst Dan Ives raised the price targets on Palo Alto Networks (NASDAQ:PANW), Qualys (QLYS), Check Point Software (NASDAQ:CHKP), CyberArk Software (NASDAQ:CYBR) and Fortinet (NASDAQ:FTNT), noting the sector is likely to be seen as a "safety blanket" amid a Category 5 storm of macro concerns and a jittery stock market.
"While investors will fret about valuations on hyper-growth names (ZS, Okta, CrowdStrike, etc.) in the near-term, our checks over the last month have been the strongest for the cyber security sector in a decade with a further uptick seen in large, seven-figure deal flow in the field," Ives wrote in a note to clients.
The basket of names was largely lower in early Thursday trading, as Palo Alto Networks (PANW), CyberArk Software (CYBR) and Fortinet (FTNT) and Qualys (QLYS) all saw small losses.
In addition, Ives said that after speaking to people in the field, he believes that cyber security budgets will increase 23% this year, a roughly 3% increase from last year, citing Russia's invasion of Ukraine and the likelihood it keeps using cyber warfare as part of its attack.
There's also likely to be an increase in federal spending over the next 6 to 12 months and when coupled with the shift to the cloud, there could be more endpoints that are exposed and thus the need for more security, Ives pointed out. 
Ives also noted that the potential for further acquisitions in the space, following this week's deal for SailPoint (SAIL) by private equity firm Thoma Bravo and last month's deal for Mandiant (MNDT) by Google (GOOG) (GOOGL), calling them "just the tip of the iceberg." The analyst said more deals are likely to come in the year ahead, with Microsoft (MSFT), Oracle (ORCL) and financial buyers the most likely acquirers.
Last week, investment firm Bank of America raised its price target on Palo Alto Networks (PANW), noting its continued "successful transition" to the cloud.