2 Cybersecurity Stocks Wall Street Believes are Overvalued

As organizations rapidly adopted the digital ways of doing business amid the pandemic, the need to protect client data and prevent cyber-attackers from gaining access to the system has led to rising investments in cybersecurity infrastructure. According to…

the Gartner 2021 CIO Agenda Survey, 61% of the more than 2,000 CIOs surveyed are expected to increase cyber/information security investment this year.

Due to the increase in ransomware attacks and growing incidents of cybercrimes, several organizations are spending large amounts on cybersecurity to strengthen their security and protect critical data. The global cybersecurity market is expected to reach $345.4 billion by 2026, registering a 9.7% CAGR from 2021 – 2026.

However, not all cybersecurity companies are expected to benefit from the industry tailwinds. Wall Street analysts believe cybersecurity stocks Zscaler, Inc. (ZS – Get Rating) and Qualys, Inc. (QLYS – Get Rating) are currently trading at price levels that are not justified by their current weak financials and growth prospects. So, it could be wise to avoid these stocks now.

Click here to checkout our Cybersecurity Industry Report for 2021

Zscaler, Inc. (ZS – Get Rating)

A San Jose, Calif.-headquartered cloud-based information security company, ZS, provides Zscaler Internet Access solution and Zscaler Private Access solution to facilitate  secure device access to externally managed applications and internally managed applications. The company also offers Zscaler Digital Experience, which  comprises Zscaler Cloud Security Posture Management and Zscaler Cloud Workload Segmentation to reduce the risk of data breaches. In addition, Zscaler Central Authority; Zscaler Enforcement Node; and Zscaler Nanolog Server modules are some of the platforms through which the company works.

In May, ZS agreed to acquire Smokescreen Technologies, a defense and deception technology company, to integrate its active defense into ZS’ Zero Trust Architecture and enhance its cyberattack detection capabilities. While this acquisition will establish ZS as the industry’s first security vendor to integrate such sophisticated technology, the increased expenses could negatively affect its cash balance.

During the third quarter, ended April 30, 2021, ZS’ revenue increased 60% year-over-year to $176.4 million. But the company’s total operating expenses increased 70.3% from their year-ago value to $181.28 million. Its net loss increased 202.3% from the prior-year quarter to $58.46 million, while its loss per share came in at $0.43 during this period. Also,  its cash declined 14.4% year-over-year to $106.59 million for the nine months ended April 30, 2021.

Analysts expect…

Continue reading at STOCKNEWS.com

 

Leave a Reply

Your email address will not be published. Required fields are marked *