It’s a classic Wall Street problem: How to play a still-unfolding disaster. Information-technology management software provider SolarWinds admitted two weeks ago that almost 18,000 customers were left vulnerable, including multiple government agencies, in a devastating hack that experts blamed on Russian security services. Wall Street scrambled to rethink and revalue.
Wedbush’s Dan Ives said that the hack is “likely to become the biggest cyber espionage/infiltrations ever seen in the U.S. government and across the enterprise landscape,” and that security software spending will rise 20% in 2021. “We believe there is a $200 billion growth opportunity in cloud security” over five years, he said, hiking price targets on a slew of security stocks, including Check Point Software, Palo Alto Networks, and Zscaler.
Citi’s Walter Pritchard wrote that many potential targets have been unable to tell whether they’ve been compromised—a sign of the attack’s sophistication. “We expect a greater focus on managed defense, threat hunting, forensics, ‘red teaming’ [testing systems with mock attacks], and incident response, backed up by human expertise,” he writes. Best positioned: CrowdStrike, FireEye, Palo Alto Networks, and SecureWorks.
Truist’s Joel Fishbein cut ratings on FireEye and SolarWinds to Hold from Buy. He noted that a 34% spike in FireEye shares on Dec. 18 smacks of “irrational exuberance,” particularly since the firm admitted that it was a victim of the attack. He downgraded SolarWinds after the stock slid 40%, lacking, he wrote, “visibility into potential business and financial model impact.”
Last Week
Short and Sweet
The Federal Reserve announced that major banks had passed new stress tests and could buy back stock and raise dividends. Stocks wavered on Tesla’s entry into the S&P 500, then rose. Data pointed to a weakening economy. On the short and quiet holiday week, the Dow Jones Industrial Average edged up 0.1%, to 30,199.87; the S&P 500 slipped 0.2%, to 3703.06; and the Nasdaq Composite rose 0.4%, to 12,804.73.
Confusion on Relief
Congress agreed to a $900 billion stimulus measure, which included $600 one-time direct payments and $300 in enhanced unemployment benefits a week. President Trump, in a video tweet, called the bill a “disgrace,” demanded $2,000 in direct payments, and suggested he might veto it—thus threatening both the stimulus and funding to keep the government running. He also vetoed the defense authorization bill. On Friday, Republicans defied Trump and blocked the $2,000 stimulus.
Pardon Season
In two rounds, Trump pardoned or commuted sentences for 49 people, including former advisers convicted of lying, lawmakers guilty of various crimes, four Blackwater contractors convicted of killing 17 Iraqis, and former campaign chief Paul Manafort.
Vaccines and Mutations
The second Covid-19 vaccine, from Moderna, rolled out in the U.S. Front-line health-care workers, long-term care residents, and those over 75 are now being vaccinated, followed by essential workers, and then those 64 to 79. In the United Kingdom, a new Covid strain, which may be 70% more contagious, led to lockdowns at home and travel bans from Europe.
Tesla Joins the Club
On Monday, Tesla became the largest company by market value to join the S&P 500 index. Tesla hit a $695 high on Monday, then settled lower. Separately, Reuters reported that an Apple EV project, Titan, would have a car by 2024 featuring “breakthrough battery technology” and self-driving capabilities.
Another Brexit Cliffhanger
U.K. and European Union trade negotiators blew through another Sunday deadline, sending the pound reeling. But, apparently beating a drop-dead Dec. 31 deadline, the two sides came up with a Christmas Eve agreement.
Annals of Deal Making
Private-equity firm Thoma Bravo agreed to buy real estate management software provider RealPage for $9.6 billion… Lockheed Martin said it was acquiring rocket-engine maker Aerojet Rocketdyne for $4.4 billion… IAC/Interactive is spinning off video production tool provider Vimeo… Diamondback Energy said it would buy QEP Resources for $2.2 billion in stock...Peloton Interactive is paying $420 million for fitness-machine maker Precor...Chinese regulators launched an antitrust probe into Alibaba Group Holding, and the stock lost 13%.
Write to Eric J. Savitz at eric.savitz@barrons.com
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December 25, 2020 at 06:35AM
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Wall Street Seeks the Upside in an Historic Hack - Barron's
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