Cybersecurity ETFs in spotlight in Q1 mixed portfolio

The hype surrounding the cybersecurity industry has waned this year due to stock market volatility, reduced cyberattacks and lower spending on cybercrime. In fact, many stocks have been crushed by concerns about high valuations. Additionally, reports from industry players on mixed earnings have dulled the shine that remained in this corner of the broad tech sector.

Let’s take a look at the earnings performance of some of the cybersecurity companies that have the largest allocation to ETFs in this industry:

Cybersecurity profits in focus

CyberArk Software (CYBR) reported earnings per share of 15 cents and revenue of $46.9 million, which topped the Zacks Consensus Estimate of 11 cents and $44 million, respectively. For the current second quarter, the company forecasts earnings per share of 18-20 cents on revenue of $47.5-48.5 million, representing year-over-year growth of 31-33%. In 2016, revenues are expected to grow 30%-31% to $209-211 million, with earnings per share of 87-91 cents.

The low end of both earnings estimates was well ahead of the current Zacks Consensus Estimate of 15 cents and 62 cents, respectively, while the midpoint of revenue estimates were in line with our estimates. CYBR gained 2.5% after the earnings announcement on May 5 after the closing bell (read: Cyber ​​​​Security stock earnings in focus).

Fire Eye (FEYE) it exceeded our profit estimates but fell short of revenue. Net loss was 83 cents per share, narrower than the Zacks Consensus Estimate of a loss of 89 cents, but revenue of $168 million missed our estimate of $172 million. FireEye expects second-quarter revenue of $178 million to $185 million and lowered its full-year forecast to $780 million to $810 million from $815 million to $845 million. The high end of both ranges is well below our estimates of $194 million for the quarter and $830 million for the year at the time of earnings release.

Net loss per share is expected to be 38-48 cents for the current quarter and $1.20-$1.27 for the full year. The midpoint of both projections was better than the Zacks Consensus Estimate, which was calling for losses of 78 cents and $2.92, respectively, at the time of the earnings release. However, FEYE shares are down 16.2% so far following the earnings announcement on May 5 following a closing signal of reduced revenue prospects.

Check Point Software Technologies (CHKP) beat our estimates on both earnings and earnings by $0.3 million and 4 cents, respectively. It expects second-quarter earnings of $1.02-$1.09 per share on revenue of $405-$435 million. The midpoint is well above our current earnings estimate of 98 cents, but below our revenue estimate of $422 million.

For the full year, revenue and earnings are expected to be $1.72 billion to $1.79 billion and $4.45 billion to $4.60, respectively. The midpoint of the revenue estimate is just below the current Zacks Consensus Estimate of $1.75 billion, while the earnings estimate is above our estimate of $4.13, respectively. Since the earnings announcement on April 20, before the opening bell, the company’s shares have fallen 7.2%.

Fortinet (FTNT) reported a wider-than-expected loss of 6 cents versus the Zacks Consensus Estimate of 1 cent, but beat our revenue estimates by $11 million. It forecast revenue in the range of $301 million to $306 million and earnings per share of 14 cents in the second quarter. Both results were ahead of our estimates of $300 million and 4 cents in revenue and earnings, respectively, at the time of the earnings release.

The company raised its 2016 revenue guidance from $1.25 billion to $1.26 billion to $1.262 billion to $1.272 billion, representing year-over-year growth of 26% and above the Zacks Consensus Estimate of $1.253 billion. Earnings per share are expected to be in the range of 69-71 cents, compared with previous guidance of 67-69 cents. This was well above the Zacks Consensus Estimate of 25 cents at the time of earnings release. Shares rose nearly 6% after first-quarter earnings were announced on April 26, after the closing bell.

Last but not least, Juniper Networks Inc. (JNPR) underperformed our estimates for both earnings and earnings by 4 cents and $35 million, respectively. For the second quarter, the company expects earnings per share in the range of 44 to 50 cents and revenue in the range of $1.16 billion to $1.22 billion. The Zacks Consensus Estimate at the time of the earnings release was for earnings of 39 cents and $1.204 billion in revenue. JNPR shares are down 1.1% since the April 28 earnings call after the closing bell (see all tech ETFs here).

ETFs in the spotlight

Mixed earnings reports have focused attention on this niche area of ​​the tech sector in the coming days. There are several cybersecurity ETFs currently on investors’ radar:

PureFunds ISE Cyber ​​Security ETF (HACK)

The fund offers global exposure to companies that ensure the security of computer hardware, software and networks and fight against all types of abuses in cyberspace. It tracks the ISE Cyber ​​​​Security Index and has 35 securities in its basket. It is well spread across components, with FTNT, CYBR and CHKP each having over 4% share, while CHKP and JNPR account for at least 3% of the assets. From an industrial perspective, software and programming make up almost 66% of the portfolio, with communications equipment, IT consulting and data services rounding out the top three.

In terms of country exposure, US companies take first place with 71%, followed by Israel (11%), the Netherlands (5%), Japan (4%), the UK (4%), South Korea (3%). ) and Finland (1%). The fund has accumulated $678.7 million in AUM and charges investors fees of 75 basis points annually. Volume is solid, with 325,000 shares in hand daily. HACK lost 11.3% year-over-year.

First Trust NASDAQ CEA Cybersecurity ETF (CIBR)

This ETF has accumulated almost $106 million in its asset base and charges annual fees of 60 basis points. It trades at a moderate average daily volume of approximately 44,000 shares. The fund tracks the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrial sectors. In total, the product has 34 shares in its basket, with five main companies accounting for 16.9% of the allocation.

Moreover, this percentage is skewed towards the software industry at 44.7%, while communications hardware comes next with a double-digit share. Like HACK, US companies account for 69% of CIBR, while the Netherlands, Israel, South Korea and many other countries account for single-digit shares. During the same period, the ETF lost 7.3% (read: Time to Invest in Tech ETFs?).

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PURFDS-ISE CYBR (HACK): ETF Research Reports

FT-NDQ CYBERSEC (CIBR): ETF Research Reports

CYBER-ARK SFTWR (CYBR): Free Stock Analysis Report

FIREEYE INC (FEYE): Free Stock Analysis Report

CHECK PT SOFTW (CHKP): Free Stock Analysis Report

FORTINET INC (FTNT): Free stock analysis report

JUNIPER NETWRKS (JNPR): Free stock analysis report

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