Cybersecurity spending reached US$114 billion in 2018, according to CB Insights. Here are the top NASDAQ security stocks of 2019.
While the NASDAQ CTA Cybersecurity Index (INDEXNASDAQ:NQCYBR) has gained over 19 percent year-to-date, a number of NASDAQ security stocks have outperformed it this year.
For example, one company has seen returns as high as 82 percent in 2019.
While it is no news that cybersecurity threats are increasing in number, it is clear that they are becoming more sophisticated and financially motivated.
According to a data breach report published this year by Verizon (NYSE:VZ), 52 percent of breaches in the period investigated included hacking, 16 percent took place in public sectors, 28 percent included malware and 43 percent involved small businesses.
Notably, denial of service attacks remain strongly correlated with security attacks. As this dynamic has become more pronounced, Grand View Research projects that the compound annual growth rate for the security market will be 10.2 percent until 2025, resulting in a US$167.12 billion market.
Continue reading to learn more about the five top NASDAQ security stocks year-to-date. Numbers were obtained on October 1, 2019, from Investing.com, and all companies listed had market caps between US$50 million and US$500 million at that time.
1. Red Violet (NASDAQ:RDVT)
Current share price: US$11.90; market cap: US$137.22 million; year-to-date gain: 82.62 percent
Florida-based Red Violet is a data analytics company with two core security divisions: IDI and Forewarn. IDI covers a broad base of security systems for enterprise. Central to its services are risk assessment, authentication and legislative compliance, among others.
Forewarn, on the other hand, focuses on security in the real estate industry. Through its data intelligence services, Forewarn helps with due diligence processes for prospective buyers by identifying financial, property ownership and criminal histories.
In September, Red Violet raised US$7.5 million for a market expansion and for working capital purposes.
For Q2, the company reported an 85 percent increase in year-over-year revenues to US$7.2 million, and a net loss of US$3.9 million. Despite this, growth in demand for Red Violet’s idiCORE services led to the addition of 350 new customers, and the company’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) came in at US$400,000. The quarter marked a first for positive EBITDA and free cash flow figures for Red Violet.
2. Identive Group (NASDAQ:INVE)
Current share price: US$5.11; market cap: US$85.82 million; year-to-date gain: 36.41 percent
Perimeter and desktop access firm Identive Group has partnerships with over 5,000 customers, including the US government. It operates along verticals such as physical access and smart card technology.
Identive’s adjusted EBITDA has been in positive territory for 12 consecutive quarters. In August, it reported a 247 percent increase compared to 2018, with adjusted EBITDA figures totaling US$2.4 million. Along with positive EBITDA, its net income reached US$400,000 for the period, driven by a 47 percent increase in software and service revenue.
3. CSPi (NASDAQ:CSPI)
Current share price: US$12.85; market cap: US$53.38 million; year-to-date gain: 35.64 percent
CSPi, a company that encompasses data protection, commercial internet of things security and application security, has a 50 year history in the security field. Its services extend through multiple industries. For example, its myricom network adapters can be applied to high-frequency trading, with latency capabilities to track thousands of trades per second.
As noted in its latest financial report, CSPi had US$16.8 million in cash for the quarter, down from US$25.1 million a year ago. Still, the company reported an increase in net income to US$532,000, a sharp departure from US$3,000 at the same time in 2018. Managed IT services helped drive revenues to US$21.6 million, an uptick from US$20 million last year.
4. Allot Communications (NASDAQ:ALLT)
Current share price: US$7.90; market cap: US$271.38 million; year-to-date gain: 28.9 percent
Security-as-a-service and DDoS firm Allot Communications provides security solutions to service providers and enterprises. Through a customized approach, Allot allows its customers to create multi-layered security solutions for mobile, connected homes and network security. According to the company, it protects over 20 million subscribers.
In Q2 2019, Allot saw a 15 percent increase in its year-over-year revenues, reaching US$26.6 million. It further reported US$101.6 million in cash, a marginal change from US$101.5 million a year ago. The company had a net loss of US$1.5 million, improving from US$2.5 million in 2018.
5. Wrap Technologies (NASDAQ:WRTC)
Current share price: US$3.90; market cap: US$115.66 million; year-to-date gain: 21.6 percent
The final company on this list of top NASDAQ security stocks is Wrap Technologies. The second physical security company on the list, Wrap Technologies designs the Bola Wrap, a remote device that ejects a tether that restrains a target. Built for security professionals and the defense industry, the tether technology inflicts no harm and operates from a distance of 10 to 25 feet.
During Q3, Wrap Technologies secured its first international order exceeding US$1 million. Following that announcement, it signed three more international distributor agreements. In its latest quarterly filing, Wrap Technologies reported a cash position of US$21 million and revenues of US$59,000.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.