2020 Was a Very Good Year for Cybersecurity
2020 Performance of Public Cybersecurity Companies
When evaluating a year’s history in the cybersecurity industry one valuable measure is the stock performance of those companies that are publicly traded. As can be seen in this chart these 21 vendors did very well in aggregate during 2020. On average they grew 58%.
Unlike the Financial Crisis of 2008-9, the economic downturn in most of the world did not impact most of these technology companies. The most common explanation is that the dramatic shift to Work From Home, thanks to lock downs required to counter the Spread of COVID-19, led to spending on security to protect a now decentralized work force. While the Solarwinds attack, revealed in December, may have accounted for some of the growth in stock valuations it is too early to verify that security spending is increasing due to that event, although it is likely.
These 21 companies are selected from the hundreds of companies that are publicly traded to represent the cybersecurity industry. Most of their revenue comes from selling security products that they produce themselves. Missing are service providers like Booz Allen, SAIC, and Accenture (all included in the CIBR ETF). Also left out are companies that have large security portfolios but are not primarily security vendors. Cisco, Splunk, and Juniper Networks are thus not included. If Cisco were included it would be the largest company by market cap ($189 billion).
The largest cybersecurity vendor by market cap at the end of 2020 was Crowdstrike ($45 billion). Crowdstrike surged past Palo Alto Networks ($38 billion) in 2020 with a 233% gain while Palo Alto grew 50%.
Zscaler led all cybersecurity companies, growing 245% to $26.31 billion in market cap. It passed Fortinet ($24 billion) which grew by 26%.
We cannot neglect the law of large numbers. Zscaler and Crowdstrike are relatively small in terms of revenue compared to the larger companies like Fortinet and Palo Alto Networks. Note how Corero Networks, a small producer of DDoS Defense appliances was the third fastest growing in terms of market cap rising 151% to $90 million, a rounding error compared to the market caps of most of the other vendors. That said, the three lowest performers in 2020, Tufin, Cyren, and Clavister, were all small market cap companies.
It is not surprising that companies in the Identity and Access Management (IAM) space performed well in 2020. While Cyberark was only up 12%, Sailpoint was up 129%, and Okta 95%.
2020 was a good year for the cybersecurity industry.