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Cybersecurity Stocks Gain as Iran Risk Could Bolster Demand

(Bloomberg) -- Shares of cybersecurity companies gained in the aftermath of last week’s killing of a top Iranian military official as investors bet the increased risk of attacks will result in more business.

Crowdstrike Holdings Inc. rose as much as 11% on Monday, adding to a 2.7% gain in Friday’s session. FireEye Inc. has advanced 5% over two days. Companies that offer threat-detection services are the ones most likely to benefit from increased risk of attacks compared with those offering more traditional services like firewall defense, according to Mandeep Singh, a Bloomberg Intelligence analyst.

“It’s really the pure-play security companies that do threat detection that are the ones that can be the direct beneficiary of something like this,” he said in an interview. “These events are more of a tailwind, it can drive up their services businesses.”

U.S. government officials are bracing for an increase in Iranian cyber-attacks on U.S. businesses and government agencies. Christopher Krebs, director of the U.S. Cybersecurity and Infrastructure Security Agency, last week warned the public to pay attention to critical systems, especially industrial control infrastructure.

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Cybersecurity stocks have outperformed the market over the past two days. The ETFMG Prime Cyber Security exchange-traded fund that tracks the industry has gained 1.3% since Jan. 2, compared with a 0.6% decline for the S&P 500 Index.

“Significant events” can still help justify spending in the cybersecurity industry even though stocks in the group are “less reactionary” than they have been in the past, Evercore ISI analysts Ken Talanian and Kirk Materne said in a note last week.

--With assistance from Alyza Sebenius and William Turton.

To contact the reporter on this story: Jeran Wittenstein in San Francisco at jwittenstei1@bloomberg.net

To contact the editor responsible for this story: Catherine Larkin at clarkin4@bloomberg.net

For more articles like this, please visit us at bloomberg.com

©2020 Bloomberg L.P.