In the early hours of July 19, cybersecurity company CrowdStrike (CRWD) released a flawed software update that caused over 8.5 million PCs using its services to be temporarily disabled. This outage resulted in chaos across various industries like banking, airlines, and healthcare, leading to a more than 20% drop in CrowdStrike’s shares over the following two trading days. It also highlighted the significance of reliable cybersecurity firms and the potential volatility of cybersecurity stocks.
Cybersecurity stocks are shares of publicly traded companies that specialize in safeguarding computer systems from digital threats. Some companies like CrowdStrike, Fortinet, and Palo Alto Networks are entirely focused on cybersecurity, while others like Datadog, Cisco, Broadcom, and Dell offer cybersecurity services along with other technology products.
Major glitches and cyberattacks can have an unpredictable impact on cybersecurity stocks. According to investment strategist Roosevelt Bowman, a single event rarely spells doom for a company. However, if an event significantly reduces a company’s expected future earnings or leads to subsequent failures, it can negatively affect the stock’s long-term trajectory. CrowdStrike, for instance, had experienced minor outages before but never on the scale of the July 19 incident. Time will tell if the company can rebuild its reputation.
When considering investing in cybersecurity stocks or ETFs, it is important to note the performance of the top cybersecurity stocks in the Nasdaq CTA Cybersecurity Index and to research and compare different cybersecurity ETFs available in the market. These ETFs provide exposure to a range of cybersecurity stocks with a single purchase, but it is essential to review their fees and holdings to ensure they align with your investment goals.
It is crucial to conduct thorough research before investing in cybersecurity stocks or ETFs, just like you would for individual stocks. Consider factors such as fees, holdings, and overall suitability for your investment portfolio. Neither the author nor the editor held positions in the mentioned investments at the time of publication.