Palo Alto, CyberArk, others may benefit as checks show 'stability' into 2023: Wedbush

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Palo Alto Networks (NASDAQ:PANW), CyberArk (NASDAQ:CYBR), Zscaler (NASDAQ:ZS) and several other cybersecurity companies are likely to keep benefiting as Wedbush Securities said that checks into larger deals have shown some "clear stability" heading into the end of the year and 2023.

Analyst Dan Ives noted there has been a "modestly positive shift" in investor sentiment after what was seen as a "generally bullish" third-quarter earnings season for the sector, including Palo Alto's (PANW) "robust" results. And with the massive shift to the cloud in the sector, more reasonable valuations, the potential for further consolidation and the threat environment likely to remain "very complex," that sentiment change is likely to continue, Ives added.

"While there is clear uncertainty in this cloudy macro and more caution is being seen across the enterprise IT landscape, we strongly believe cyber security spending is actually gaining more incremental budget dollars into 2023 and well positioned vendors in the sector are the core names to own," Ives wrote in a note to clients.

Certain areas of the cybersecurity space have seen strong deal flow, including identity threat detection, privileged access management, endpoint/ vulnerability security and a discernible shift to zero trust architecture, Ives explained.

In addition to the aforementioned named, Ives also highlighted Checkpoint (CHKP), Fortinet (FTNT) and Tenable (TENB) as companies that have "moats that are expanding" within the cyber security landscape.

Ives also noted that that while there may be some nervousness from investors as cybersecurity companies give guidance for 2023 when they report fourth-quarter results, investor expectations have come down, which likely helped take some risk off the table.

Earlier this month, Loop Capital upgraded Palo Alto Networks (PANW), noting "signs of accelerating momentum driven by an increase in large deal activity."