Please ensure Javascript is enabled for purposes of website accessibility

Why Cybersecurity Stocks Plunged Today

By Evan Niu, CFA - Mar 12, 2020 at 2:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares fell despite the fact that cybersecurity companies could see increased demand from a surge in remote workers.

What happened

Shares of prominent cybersecurity companies have plunged today amid ongoing market volatility related to the novel coronavirus pandemic. Major indexes have been gyrating wildly, even after the Federal Reserve said it would inject $1.5 trillion into capital markets through open-market Treasury purchases. As of 1:45 p.m. EDT, here's how these cybersecurity stocks were faring:

  • FireEye (MNDT 0.64%): down 11%.
  • Palo Alto Networks (PANW 1.52%): down 8%.
  • Check Point Software Technologies (CHKP 4.69%): down 11%.

Somewhat ironically, cybersecurity companies could actually see heightened demand as many organizations urge employees to work remotely in response to the crisis, which could increase security risks. Still, investors are panicking over the possibility that the viral pandemic will push the global economy into a recession.

Check Point's logo

Image source: Check Point Software.


When FireEye reported earnings in early February, it did not discuss potential coronavirus impacts in its release nor in the related conference call with analysts. The company did list the outbreak among the risk factors in its 10-K annual report. Securities lawyers that write such filings do tend to be more thorough in that respect.

"The manufacturing operations of some of our component suppliers are geographically concentrated in Asia, which makes our supply chain vulnerable to regional disruptions," FireEye wrote. "A localized health risk affecting employees at these facilities, such as the recent coronavirus outbreak or the spread of a pandemic influenza, could impair the total volume of components that we are able to obtain, which could result in substantial harm to our results of operations."

Palo Alto

Palo Alto similarly relies on component suppliers in Asia, which is where its coronavirus risk is concentrated. However, the company's outlook, which calls for revenue of $835 million to $850 million this quarter, does not factor in the disease.

"Please note that our guidance does not reflect any potential disruptions in our global supply chain that could result from the coronavirus, which we are carefully monitoring," CFO Kathy Bonanno said in late February.

"Our products rely on key components, including integrated circuit components, which our manufacturing partners purchase on our behalf from a limited number of component suppliers, including sole source providers," Palo Alto warns in regulatory filings. "The manufacturing operations of some of our component suppliers are geographically concentrated in Asia and elsewhere, which makes our supply chain vulnerable to regional disruptions, such as natural disasters, fire, political instability, civil unrest, a power outage, or a localized health risk, such as the coronavirus, and as a result could impair the volume of components that we are able to obtain."

Check Point Software

In January, CheckPoint discovered a security flaw in Zoom Video's videoconferencing platform that could allow hackers to eavesdrop on calls. The companies worked together to fix the issue, but the episode underscores the security risks that companies now face as more employees work remotely to reduce the spread of the novel coronavirus.

More recently, Check Point's head of cyber research, Yaniv Balmas, told MarketWatch that hackers are increasingly targeting remote workers for precisely these reasons. Balmas told the outlet, "Today, since everybody is using these remote services, this attack surface becomes much more attractive."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Check Point Software Technologies Ltd. Stock Quote
Check Point Software Technologies Ltd.
$124.10 (4.69%) $5.56
Palo Alto Networks, Inc. Stock Quote
Palo Alto Networks, Inc.
$510.71 (1.52%) $7.64
Mandiant, Inc. Stock Quote
Mandiant, Inc.
$21.94 (0.64%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.