Cybersecurity Stocks Shoot Up on Petya Ransomware Attack

Just a month after the WannaCrypt or WannaCry attack, the world was hit with another ransomware attack on Jun 27. Initially hitting Ukraine, this new ransomware attack has spread to 64 countries, so far, across Europe, Asia, North and South America, according to Microsoft MSFT .

Known as Petya, the malicious software reportedly seized the control of computers and encrypted files with a password which only hackers have access to. After that, victims were asked to pay ransom in order to regain control of their systems. The hackers demanded ransom in bitcoin.

It came a month after the WannaCry hack which locked up more than 200,000 computers paralyzing factories, hospitals, shops and schools in over 150 countries.

According to media reports, heavy concentration of infections from Petya attack has been noticed in Ukraine and Russia. Per Microsoft, over 12,500 computers have been struck in Ukraine alone.

Among the worst impacted by the latest attack were Russia's top oil producer Rosneft, Ukrainian international airport, the world's biggest advertising company WPP WPPGY based in Britain, Danish shipping giant A.P. Moller-Maersk AMKBY , Russian metals giant Evraz EVRZF , German postal and logistics company Deutsche Post DPSGY , French construction materials company Saint Gobain, U.S. drug giant Merck (M), and food and beverage company Mondelez International (MDLZ).

Per latest media reports, the new ransomware attack has made its way to the Asia-Pacific region, infecting companies in Australia and India. In Australia, computers at various companies, including Cadbury chocolate plant and law firm DLA Piper, were hit by the ransomware. India's largest container port, Jawaharlal Nehru Port, near Mumbai, is also among other victims.

It is believed that the organizations which haven't upgraded with Microsoft's new security patches will still remain vulnerable to Petya attack. Notably, Microsoft stopped providing support to its older operating systems (OS) - Windows XP, Windows 8 and Windows Server 2003 - in the latter half of 2016, due to which these systems were not upgraded with Microsoft's new security patches.

This made the older OS more vulnerable and hackers took the advantage of the same. However, after May's WannaCry attack, Microsoft took a serious action on this issue and released a security patch for its older OS.

This is why the impact of Petya attack is not larger than the WannaCry attack. Citing reports of Quartz, which tracks bitcoin payments to an account linked to the attacks, TheStreet revealed that Petya made $10,200 worth of bitcoins in the first day, which is approximately $20,000 lesser than what WannaCry made on the very first day.

Cybersecurity Stocks Gained

The latest cyber attack proved that government or private - most organizations across the whole world lack proper security measures.

But believe it or not, there does appear to be a positive side to this episode. A cyber attack is good news for cyber security companies, because it increases the chances of security-related purchases by both companies and governments. Hence, investors flock to these shares, shooting up share prices.

This time was no different - Proofpoint PFPT and Qualys QLYS were the top gainers yesterday - witnessing 5% and 3% rise, respectively. This was followed by CyberArk CYBR , FireEye FEYE and Fortinet FTNT gaining a respective 2.8%, 2.1% and 1.4%.

We expect to see this upswing in share prices of the Cybersecurity stocks to continue during today's trading session as well.

Fresh Boost for Security Stocks

The silver lining to this whole episode will be rise in demand for security-related products among companies and governments, in our opinion. We believe that it could bring cybersecurity stocks back into the limelight, which witnessed a dismal run in 2015. Though the cybersecurity stocks seem to be recovering since April last year, most stocks are still trading very low to their all-time highs.

It should be noted that the financial well-being, brand image and reputation of enterprises, and governments are always exposed to the risk of cyber threats. Consequently, cybersecurity has become a mission-critical, high-profile requirement.

Clearly, cases of such attacks drive the need to beef up cyber safety measures, in turn increasing demand for the services offered by cybersecurity companies.

Furthermore, with rapid technological advancement, organizations are increasingly adopting the "bring your own device" (BYOD) policy to enhance employee productivity with anytime/anywhere access. This trend, in turn, calls for stricter data security measures.

Moreover, various independent research firms forecast strong demand ahead. According to a Markets and Markets report, worldwide cybersecurity spending will reach $101 billion in 2018 and $170 billion by 2020. Gartner had earlier mentioned that IT security spending peaked to $75 billion in 2015.

Bottom Line

Considering the aforementioned factors, it makes sense to invest in this hot industry group as cybersecurity players are likely to witness sturdy growth, moving ahead. Some better-ranked stocks in the cybersecurity space are Fortinet and Check Point Software CHKP , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Apart from this, we believe that the recent attack will also benefit Microsoft as it may see a huge demand from organizations and individuals for its Windows 10 OS. The stock currently carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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