Cybersecurity growth: an essential service of the tech world
Stock summary: a leader in the field, offering growth at a reasonable price
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In this summary:
Cybersecurity: an essential service of the tech world
Stock analysis: a US market leader in cybersecurity
Main points summarised at the end
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Cybersecurity: an essential service of the tech world
What would you consider to be an "essential service"?
Most people would probably start with safe housing, access to clean water, and an adequate supply of basic food.
Next might come reliable energy supplies, including fuel for transport, piped gas for cooking or heating, and electricity.
Personally, I think a reliable electricity supply is the most important thing that we take for granted. Without it, modern civilisation would collapse within a few days.
Imagine no refrigerated supply chain or cold storage for perishable foods (a common problem in poorer countries), no lighting (including on the streets), no electrically heated hot water, no recharging the batteries of electronic devices (or plug-in electric vehicles), no electric cookers, no traffic lights, no wi-fi internet connection, no functioning electronic medical devices in hospitals, no phones, no dishwashers, no washing machines, and so on.
Without electricity, it's back to the Middle Ages in a flash! Which is fine if you fancy being filthy, living in a shack on a near starvation diet, and having a 99% chance of dying by the age of 35. For my part, I'm not that keen.
These days, other essential services include affordable healthcare, education and access to transport. A reliable internet connection is pretty essential too, given how much of our lives must be organised online (communication, shopping, banking, investing, government bureaucracy, and so on).
Beyond the internet, we have a general reliance on technology. Not just the plethora of gadgets that we use in daily lives. But also vast amounts of electronic data that must be stored, organised, analysed, shared. The volumes of such data continue to grow and grow.
Every individual and every organisation, whether private or within government, has to store huge amounts of data. The vast majority of it is not for general consumption. It's confidential.
This creates a tempting target for hackers and other malicious actors, whether they are bored teenagers looking for a challenge, criminal enterprises, or agents of the state. (And yes, I think it's likely that most large states are up to this kind of thing, not just the "baddies".)
In turn, the threat of data theft has led to the need for cybersecurity products and services, to prevent illicit data access. This isn't new. But, as more and more data is stored electronically, and hacking techniques become more advanced (now with added AI!), the cybersecurity business continues to grow and become more complex.
A huge data loss, such as confidential information relating to thousands or millions of customers, is something that terrifies corporate boards, and especially their Chief Technology Officers (CTOs). The business and reputational damage could be huge, potentially destroying an enterprise. If there's one thing that any competent CTO doesn't want to happen, it's a large and very public data breach.
The same is true of governments. They don't want their dirty laundry on display to the general public. So they are also highly motivated to prevent unauthorised access.
Which makes cybersecurity an essential service in a tech-dependent world, within both the private and public sectors. It also means that organisations are prone to pay for the best that they can afford, and not skimp on costs.
Cybersecurity has to be a spending priority all of the time, not an afterthought. This ensures that leading vendors of cybersecurity products and services can command high profit margins.
Which brings me onto today's stock analysis (for paid subscribers). It's of a leading cybersecurity company, with very healthy profit margins, that generates loads of cash, and has a very strong track record of past growth.