The S&P 500 has tumbled nearly 20% so far in 2020 as fears of a coronavirus-sparked recession continue to grow, but that’s not impacting all industries in the same fashion.
While the government-imposed shutdowns have crippled the restaurant and retail industries, they haven’t had nearly the same effect on technology companies. In fact, the shift for a swath of America’s service workers to work from home has been a big boost to the companies enabling it.
The most talked about work from home beneficiary is video conferencing company Zoom (ZM), which has seen shares more than double in value this year, jumping 120% through March. But cybersecurity stocks that also debuted in 2019 like CloudFlare (NET), up 40% year-to-date, and CrowdStrike (CRWD), up 16% year-to-date have similarly bucked the overall downtrend.
According to CrowdStrike CEO George Kurtz, the reasons as to why cybersecurity companies have caught a rally are similar to the Zoom theory in that companies navigating a changing landscape will inevitably have changing priorities as more employees work from home.
“We look at security itself in the ‘corporate hierarchy of needs’ as shelter. It's something that you have to have, despite what's going on in the world,” Kurtz told Yahoo Finance, highlighting a reported uptick in malicious attacks on increasingly stressed corporate networks. “There's a lot of chaos and the bad guys are not going to be sheltering in place.”
The need to bolster security
Even the World Health Organization has had to defend itself against a rising amount of cyberattacks, as other hackers opt to scam money from victims though phony coronavirus relief plots. “It's an environment that's ripe for people wanting to click on emails and gain more information on it,” Kurtz said.
For CrowdStrike, the hope would be that companies wanting to mitigate fears of falling victim to a rise in attacks might be led to sign up for its cloud-based end point protection platform and other services. As Kurtz conceded, just as he did on his company’s last earnings call when he said forward guidance was already de-risked due to uncertainties regarding coronavirus, even his company’s sales pipeline could be disrupted if it gets harder to connect with clients.
“There's a lot of unknown unknowns,” he said. “You can see the acceleration in home use, and you could potentially see deals being delayed.”
For Okta, another cybersecurity company that offers its own slate of cybersecurity products more focused on user authentication, co-founder Frederic Kerrest explained that while the shift for employees to work from home is here in the short-term, the overall need to bolster security won’t go away after things return to normal.
“Once people get adjusted to working from home on videoconferencing and these kind of things, I think we might see more and more of it when we come out of it,” he said. “That's why a lot of modern enterprise software technologies that are in this cloud world seem to be doing alright so far, because they're helping a lot of their customers be successful in this new environment.”