The embrace of remote lifestyles and a rapid digital transformation amid the COVID-19 pandemic, among other factors, has fostered an increasing number of cyber-attacks given an increasing dependency on cloud computing. In fact, the recent, infamous Colonial Pipeline ransomware attack starkly highlighted the importance of advanced cybersecurity services. Investors’ interest in the cybersecurity sector is evident in the First Trust NASDAQ Cybersecurity ETF’s (CIBR) 17.3% returns over the past six months versus the tech-heavy Nasdaq's 12.6% returns.
Of late, investors have been rotating out of tech stocks into cyclical stocks to take advantage of the economic recovery. Rising inflation has also been a major concern for investors as they drop expensive tech stocks. However, cybersecurity companies’ products and solutions are expected to be high in demand going forward. According to Grand View Research, the global cyber security market is expected to grow at a 10.9% CAGR between 2021 - 2028.
In this scenario, we think it is wise to bet on VMware, Inc. (VMW) and Mimecast Limited (MIME) because they appear to be a steal at their current price levels given their massive growth potential.
Click here to checkout our Cybersecurity Industry Report for 2021
VMware, Inc. (VMW)
As one of the leading companies in the cloud infrastructure space, VMW provides software in the areas of hybrid and multi-cloud, modern applications, networking, security, and digital workspaces internationally. It provides VMware multi-cloud solutions including vSphere, vSAN and VxRail, vRealize Cloud Management solutions and VMware Cloud Foundation.
The company announced on April 14 that a Special Committee of independent directors and Dell Technologies Inc. (DELL) have agreed to terms in which VMW will be spun-off from DELL. The move is expected to help give VMW increased strategic, operational and financial flexibility and agility to drive its growth strategy while maintaining its alliance with DELL.
VMW’s revenue increased 7% year-over-year to $3.30 billion for the fiscal fourth quarter ended January 29. Its operating income grew 303% year-over-year to $1 billion. Its net income came in at $791 million, which represents a 146.4% year-over-year increase. The company’s EPS came in at $1.87, up 146% year-over-year.
Analysts expect its EPS to increase 11.2% year-over-year to $7.65 in its fiscal year 2023. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 11.2% year-over-year to $2.93 billion for the about-to-be-reported quarter, ended April 30, 2021. The stock has rallied 22.8% over the past year to close Friday’s trading session at $164.30.
VMW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Value and Quality also. Within the Software - Business industry, VMW is ranked #10 of 60 stocks. To see the additional POWR Ratings for VMW (Stability, Growth, Sentiment and Momentum), click here.
Click here to check out our Cloud Computing Industry Report for 2021
Mimecast Limited (MIME)
Headquartered in London, MIME provides a software-as-a-service (SaaS) enterprise email management service. Its Mimecast Email Security solution protects against the delivery of malware, malicious URLs and attachments, spam, viruses, impersonation attacks, phishing, and spear-phishing attacks. Its offerings also include Cyber Resilience Extensions, Mimecast Mailbox Continuity, and Mimecast Web Security.
MIME partnered with Netskope in February 2021 to deliver an omnichannel data loss prevention (DLP) solution combined with robust intelligence to protect cloud and web resources and usage, whether direct-to-Internet SaaS, web, or email. With the growing number of cyber-attacks, this solution is expected to be in high demand in the near-term.
MIME’s total revenue increased 17% year-over-year to $133.90 million in the first quarter, ended March 31. Its income from operations grew 49.4% year-over-year to $7.66 million. Its net income came in at $5.77 million, which represents a 128.4% year-over-year increase. The company’s EPS came in at $0.09, up 125% year-over-year.
For the current quarter, ending June 30, 2021, analysts expect MIME’s EPS and revenue to increase 31.8% and 21.9% respectively, year-over-year to $0.29 and $138.08 million. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 27.5% over the past year to close Friday’s trading session at $47.59.
MIME’s strong fundamentals are reflected in its POWR Ratings. The company has an overall B rating , which equates to Buy in our proprietary ratings system. The stock has an A grade for Growth, and a B grade for Value, Sentiment and Quality.
We have also graded MIME for Stability and Momentum. Click here to access all of MIME’s ratings. MIME is ranked #10 of 125 stocks in the Software - Application industry.
Click here to checkout our Cybersecurity Industry Report for 2021
VMW shares were trading at $164.40 per share on Monday afternoon, up $0.10 (+0.06%). Year-to-date, VMW has gained 17.21%, versus a 11.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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