Cyber security firms; new Wall Street darling?

NEW YORK, USA: Cyber security companies such as Sourcefire and Websense have become Wall Street's names to watch after a recent wave of hacking attacks against global agencies and companies.

Recent cyber attacks on multinational firms and institutions -- from Google and Citigroup to the International Monetary Fund -- have raised fears that governments and the private sector are ill-prepared to beat off hackers.

"There is absolutely no question that this (sector) is going to be at the focal point in the future in terms of investments. Everyone is showing a lot of interest," said Robert Francello, head of equity trading at Apex Capital in San Francisco.

Reflecting the growing interest, a number of brokerages including Citigroup and Bank of America have recently started rating or upgraded their price target on the firms. The shares have outperformed the broader market over the last three months.

Citigroup in late May put a price target on Sourcefire of $32.00. That is about 21 per cent above where Sourcefire shares closed on Tuesday, when it rose 3.8 per cent to $26.29.

Citi, in a note on Sourcefire, Websense and Fortinet, said that "attack motivation has shifted to financial gain, intellectual property theft and national security compromise, a combination of which is driving growth for countermeasures."

Citi has a target share price for Fortinet Inc of $52.00. Fortinet shares rose 0.6 per cent to $22.89 on Tuesday.

Shares of Websense Inc rose 2.4 per cent at $24.52 on Tuesday, putting them close to Citigroup's price target of $25.00.

In June, Bank of America also raised its price target on Check Point

In early June, Bank of America also raised its price target on Check Point Software Technologies Ltd to $59 from $55. The stock closed up 0.9 per cent at $53.76 on Tuesday.

Checkpoint, Fortinet and Websense have outperformed the S&P SmallCap 600 index , rising by 4-7 per cent in the last three months while the index has fallen nearly 5 per cent.

Fortinet stock was trading 64 times its expected 2011 earnings while Sourcefire was trading about 55 times expected earnings for 2011.

Websense was trading around 15 times the expected earnings for 2011, according Thomson Reuters I/B/E/S.

Growth expected

The U.S. Senate's website was hacked over the weekend, leading to a review of all its websites in the latest embarrassing breach of security to hit a major U.S.-based institution.

"Even in a choppy market, technology spending tends to remain strong, especially the content security and cyber security sectors," said Doug Godine, head of institutional sales and trading at Signal Hill Capital in Baltimore.

Security continues to be a huge part of the government's budget, he said, adding, "Their commitment is strong."

This month, Internet giant Google pointed the finger at Chinese hackers for an attempt to access the Gmail accounts of assorted rights activists, officials and others. China's government has denied involvement and said it, too, is a victim of international hacking.

Entertainment giant Sony also suffered serious damage to its reputation after hackers accessed the details of millions of PlayStation users, while Lockheed Martin also reported attempts to steal data.