Is now a good time to build or top up a position in cybersecurity stocks?

Investing.com -- In a note to clients this week, BCA Research assessed whether now is an opportune time to build or top up a position in cybersecurity stocks. 

Overall, the firm believes so, telling investors that the cybersecurity industry is well-positioned in the current market environment, offering investors a strategic opportunity amid rising geopolitical tensions and the ongoing global trade war.

“Cybersecurity is one of our strategic investment themes, which looks particularly interesting in light of the trade war and heightened geopolitical tensions,” BCA wrote. 

As a largely domestic service sector, cybersecurity is “less exposed to tariffs than other industries and, if anything, benefits from geopolitical tensions as customers seek protection from international cyberattacks and cybercrime.”

While the sector has underperformed broader Software & Services names in recent years due to portfolio composition and some temporary headwinds, BCA noted that the long-term thesis remains solid. 

They state that the adoption of advanced technologies such as generative AI, 5G networks, and quantum computing is accelerating the need for robust cyber defense. 

“Adoption of cloud-based GenAI-powered applications presents novel cybersecurity vulnerabilities,” the analysts wrote.

Crucially, the industry is said to be maturing. “The focus is shifting from an all-out Capex mode to optimizing operational and bottom-line efficiency,” BCA said, citing improving fundamentals and surging margins despite a recent slowdown in sales.

With valuations now moderating and the sector experiencing a pullback, BCA sees this as “an attractive entry point into the theme.” The firm recommends accessing the space through large, liquid ETFs such as CIBR, BUG, and HACK.

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Bottom line, BCA maintains its “positive long-term outlook on cybersecurity,” calling it “a predominantly service industry, somewhat protected from tariffs” where “cyber defense remains more important than ever.”

 

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