Cybersecurity

Cybersecurity ETFs in Focus on Q4 Earnings Strength

Digitization has increased the need for cybersecurity given instances of security breaches and threats. We have seen years’ worth of digital transformation in a few months amid the COVID-19 pandemic. Solid earnings have added to the strength. Most of the cybersecurity firms came up with stronger-than-expected earnings, outpacing the Zacks Consensus Estimate for both earnings and revenues (read: Don’t Fear, Buy the Dip in Tech ETFs).

Let’s check out the fourth-quarter results of some of the cyber security firms that have the largest allocation to the ETFs in this niche area of the technology sector:

Cybersecurity Earnings in Focus

Fortinet (FTNTFree Report) posted earnings per share of 83 cents, easily topping the Zacks Consensus Estimate by 16.9% and improving significantly from the year-ago quarter’s 77 cents. Revenues rose 21% year over year to $748 million and were above the consensus mark of $722 million. The company projects revenues in the range of $670-$685 million and earnings per share of 70-75 cents for the first quarter. For the full year, revenues and earnings per share are expected to be in the range of $3.025-$3.075 billion and $3.60-$3.75, respectively.

FireEye (FEYEFree Report) reported earnings per share of 12 cents, which beat the Zacks Consensus Estimate of 10 cents and came in higher than the year-ago earnings of 7 cents. Revenues increased 5% year over year to $23048 million and surpassed the consensus mark of $239 million. FireEye expects revenues of $235-$238 million and earnings per share of 5-7 cents for the first quarter. For the full year, the company projects revenue guidance of $990 million to $1.01 billion and earnings per share guidance of 35-37 cents (see: all the Technology ETFs here).

Proofpoint outpaced the Zacks Consensus Estimate by 9 cents for earnings and $6 million for revenues. Earnings per share was down a penny from the year-ago quarter while revenues jumped 13%. For the first quarter, the company expects revenues in the range of $280-$282 million and earnings per share of 39-40 cents. For the full year, Proofpoint projects revenues of $1.19-$1.20 billion and earnings per share of $1.91-$1.99.

Check Point Software Technologies (CHKPFree Report) posted earnings per share of $2.17, outpacing the Zacks Consensus Estimate of $2.11, and revenues of $564 million, which also came above the consensus mark of $555.1 million. On a year-over-year basis, earnings grew 7% while revenues were up 4%. The company offered guidance for the first-quarter and full-year 2021. It projects revenues in the range of $485-$515 million and earnings per share of $1.45-$1.55 for the ongoing quarter. For 2021, Check Point estimates revenues of $2.08-$2.18 billion and earnings per share of $6.45-$6.85.

CyberArk Software (CYBRFree Report) outpaced the Zacks Consensus Estimate by 41.38% for earnings. Revenues of $144.5 million missed the consensus mark by 12.78%. Earnings per share declined 15.5% year over year while revenues grew 11.5%. The company expects revenues of $106-$112 million and the bottom line to be in the range of loss of 3 cents to earnings of 7 cents for the first quarter. For 2021, CyberArk projects revenues in the range of $484-$496 million and earnings per share of 46-64 cents.

ETFs in Focus

The string of earnings beat has pushed cybersecurity ETFs higher by around 1% each over the past 10 days. Below we have highlighted the four funds in detail:

ETFMG Prime Cyber Security ETF (HACKFree Report)

The fund provides global exposure to the cybersecurity industry, comprising companies that offer hardware, software, consulting and services to defend against cybercrime. It tracks the Prime Cyber Defense Index, holding 60 securities in its basket. It is well spread out across components with the in-focus five firms accounting for nearly 3% share each. The fund has amassed $2.2 billion in AUM and charges 60 bps in fees per year. Volume is solid as it exchanges nearly 312,000 shares in hand per day.

First Trust NASDAQ Cybersecurity ETF (CIBRFree Report)

This ETF has accumulated nearly $3.5 billion in its asset base and charges 60 bps in annual fees. It trades in a good average daily volume of around 820,000 shares. The fund follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. In total, the product holds 41 stocks in its basket with the in-focus firms accounting for around 3% share each (read: Cisco Reports Revenue Decline Again: ETFs in Focus).

Global X Cybersecurity ETF (BUGFree Report)

This ETF offers exposure to the companies that stand to benefit from the increased adoption of cybersecurity technology and follows the Indxx Cybersecurity Index. It holds 297 stocks in its basket with the in-focus five firms accounting for a combined share of 25.5%. The ETF has accumulated $279.7 million in its asset base and trades in average daily volume of 344,000 shares. It charges 50 bps in annual fees.

iShares Cybersecurity and Tech ETF (IHAKFree Report)

This fund provides access to companies at the forefront of cybersecurity innovation and follows the NYSE FactSet Global Cyber Security Index. Holding 45 stocks in its basket, the in-focus firms collectively account for 17% of the assets. IHAK has AUM of $351.6 million and charges 47 bps in fees per year. It trades in volume of 161,000 shares a day on average.

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Source: https://www.zacks.com/stock/news/1264639/cybersecurity-etfs-in-focus-on-q4-earnings-strength

Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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