Cybersecurity stocks savaged for a second week as Symantec results disappoint

Cybersecurity stocks fell for a second week in a row, as earnings beats and raised outlooks did little to boost prices in a sector that some believe is overpriced.

The ETFMG Prime Cyber Security ETF HACK, -0.61% has fallen 4.9% since the first earnings report of one of its components, Check Point Software Technologies Ltd. CHKP, +0.01% , on July 25. Other components of the ETF include Cisco Systems Inc. CSCO, +0.71% , which is scheduled to report earnings Aug. 15, and Palo Alto Networks Inc. PANW, -0.91% , whose quarterly report is scheduled scheduled for Sept. 6.

The First Trust Nasdaq Cybersecurity ETF CIBR, -0.64% is down 4.3% over the same period.

Following the declines, the HACK ETF is up 17.5% on the year and the CIBR ETF is up 14.4%, compared with a 6.2% gain for the S&P 500 index SPX, +0.46% and a 13.2% gain for the tech-heavy Nasdaq Composite Index COMP, +0.12% . On Friday, both ETFs put weekly declines on the books for a second straight week.

Shares of Symantec Corp. SYMC, -7.81% were among the sector’s biggest losers on the week after the company reported weaker-than-expected outlook and billings and said an internal audit was still ongoing. Symantec shares finished the week down 7.1% at $19.25, after a 7.8% decline Friday. Of the 29 analysts who cover Symantec, two have buy ratings on the stock, 25 have hold ratings, and two have sell ratings. Following earnings, analysts’ average share-price target fell to $21.05 from $23.36, according to FactSet data.

Cowen analyst Gregg Moskowitz, who has an underperform rating on the stock, called it “another highly disappointing quarter” for Symantec. Jefferies analyst John DiFucci, who has a hold rating, said the company faces notable challenges in its enterprise business, namely its SEP 14 endpoint protection product and the Blue Coat Secure Web Gateway business.

In a note, DiFucci said “in endpoint, the company faces a multitude of private upstarts as competitors offering modern solutions that are competitive with SEP 14. Similarly, in the Secure Web Gateway market, the company continues to face direct competition from companies such as Zscaler and iboss, and indirect competition from the next-generation firewall vendors offering URL filtering functionalities that are considered ‘good enough’ to meet the needs of some enterprises.”

Also on the week, shares of Qualys Inc. QLYS, -1.16% and FireEye Inc. FEYE, -2.79% tumbled even after both companies beat on earnings and outlook. Qualys shares finished the week down 5.9% at $85.15, after a 1.2% decline Friday. FireEye shares finished the week down 7.4% at $14.96, after Friday’s 2.8% decline.

Weekend roundup: Apple’s trillion | Musk rallies Tesla | FAANG or no FAANG?

In an interview with MarketWatch on the Tuesday ahead of earnings, FireEye Chief Executive Kevin Mandia summed up the challenge facing the sector: “It’s a market where the valuations are too damn high.”

Akamai Technologies Inc. shares AKAM, +0.44% also fell despite an earnings beat. Akamai shares finished the week down 6.3% at $74.61, with the weekly damage pared back by a 0.4% gain Friday.

Fortinet Inc. FTNT, -0.18% was an exception on the week as shares rallied to record heights after the company’s earnings and outlook topped the Street view. Fortinet shares finished the week up 11.9% at $73.63, even after a 0.2% decline Friday.

The first week of cybersecurity earnings saw Check Point, Proofpoint Inc. PFPT, -0.44% and F5 Networks Inc. FFIV, -0.02% all topping Wall Street estimates for the quarter, but also saw Imperva Inc.’s IMPV, -2.33% revenue falling short of Wall Street expectations, and Juniper Networks Inc. JNPR, +0.61% guiding below the Street consensus.

Carbon Black, CyberArk, SailPoint, Cisco earnings ahead

Carbon Black Inc. CBLK, +3.02% , which reported its first quarterly earnings as a public company on June 7 (it went public in May), and CyberArk Software Ltd. CYBR, +1.04% are both scheduled to report Tuesday after the bell, and SailPoint Technologies Holdings Inc. SAIL, -0.90% is scheduled to report Wednesday.

Cisco drew attention to itself in the past week by offering to acquire two-factor-authentication start-up Duo Security for $2.35 billion. Canaccord analyst Richard Davis said in a note the deal is a positive for SailPoint and Okta Inc. OKTA, -3.04% . 

Company	FactSet consensus quarterly EPS estimate	FactSet consensus quarterly revenue estimate
Carbon Black	per-share loss of 41 cents	$48.9 million
CyberArk	24 cents	$72.9 million
SailPoint	per-share loss of 2 cents	$50 million
Cisco	69 cents	$12.77 billion

Cisco’s acquisition of Duo once again places focus on whether security startups like Palantir Technologies, CrowdStrike Inc. and Cylance Inc. will go the IPO route or get acquired in an anticipated wave of consolidation. Recently, Tenable Holdings Inc. TENB, -1.87% IPO’d with shares jumping nearly 32% on their first day of trading.

Zscaler Inc. ZS, +0.81% , which last reported June 6, has yet to provide a scheduled date for its next earnings report.