Palto Alto Networks (NASDAQ:PANW), Palantir (NYSE:PLTR), Tenable (NASDAQ:TENB) and several other software companies are likely to see a benefit from increased spending by the U.S. government on cybersecurity, investment firm Wedbush Securities said on Friday.
Doing a deep diver in the sector, analyst Dan Ives noted that recent data breaches, including the high-profile SolarWinds hack last year and the recent attack suffered by Uber (UBER), there is a "large effort" from the Biden administration to boost the country's security on a software and cyber level.
Ives noted the Bipartisan Cyber Incident Reporting Act of 2021 and the recently signed CIRCIA Act as being catalysts for improved spending in the space.
"As the threat landscape and bad actor and nation-state backdrop amplified by cyber warfare and crime continues to accelerate, federal spending has been forced to adapt and increase investment, providing an open opportunity for cybersecurity firms to take market share in the expansive government contract world," Ives wrote in a note to clients.
Delving deeper, Ives noted there are a lot of spending initiatives coming from the Beltway, as the government continues to be diligent about which contractors it works with and where they are likely to see benefits, including from the National Institute of Standards and Technology, FedRAMP, the Cybersecurity and Infrastructure Security Agency and the General Services Administration.
The analyst also noted that between 85% and 90% of deals the firm is tracing have closed and federal spending activity was described as "very strong" over the past few months. He also noted that some federal cyber security budgets have rose between 35% and 40% year-over-year.
As such, companies like Palo Alto Networks (PANW), Tenable (TENB), Zscaler (ZS), Fortinet (NASDAQ:FTNT), Crowdstrike (CRWD), Palantir (PLTR), Telos (TLS), and CyberArk (CYBR) are likely to benefit.
"With increased cyber budgets across all government verticals throughout 2022, including cybersecurity, firewall refreshes and vulnerability/threat management, we believe cyber companies are poised for significant growth providing a massive land grab opportunity for well-positioned cyber security vendors with the right products/value propositions that hit core pain points facing the government today," Ives explained.