Deutsche Bank's Takeaways From Gartner Security Event

In a report issued Tuesday, Deutsche Bank analysts Karl Keirstead and Imtiaz Koujalgi provided some takeaways from the Gartner Security Event.

Bullish Feedback

Not one of the sources to which the experts spoke (customers, vendors and Gartner analysts) flagged plans of a slowdown in enterprise spending on security IT for this year.

“Although this has become the consensus Street view, we believe that we’re still relatively early-stage in a multi-year reset in terms of the portion of IT budgets allocated to security technology,” the analysts comment.

Moreover, while they are fully aware of the steep appreciation that security stocks have experienced (on average, 75 percent in the last year and 26 percent year-to-date), they are still positive about the sector's potential.

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Firewalls Are Not Dying Yet

The focus in security software events is usually put on the emergence of new spending areas, but the Gartner Security Event left Keirstead and Koujalgi with the impression that the quite-mature network perimeter firewall market can still see an acceleration in spending over 2015.

The analysts asked around about how Palo Alto Networks Inc (NYSE: PANW) is able to drive 50 percent growth in a market that is growing by 10 percent, “and the feedback was that PANW is taking share from everyone and expanding the firewall TAM." However, respondents also said that displacements of Check Point Software Technologies Ltd. (NASDAQ: CHKP) are not as common as Palo Alto suggests.

Other Markets

Other areas seeing fast expansion include incident response and advanced threat detection (both FireEye Inc (NASDAQ: FEYE) markets), “threat intelligence collection and analytics (Splunk Inc (NASDAQ: SPLK) is being used more) and technology to better control internal employee access to data.”

However, Gartner also highlights a negative trend for FireEye: “more enterprises are looking to acquire ‘good enough’ malware sandboxing technology as a (cheaper) add-on to a core firewall sale rather than as a stand-alone (and expensive) appliance.”

The Stocks

Deutsche Bank remains positive on Palo Alto, Check Point, Fortinet Inc (NASDAQ: FTNT), Proofpoint Inc (NASDAQ: PFPT) and Imperva Inc (NYSE: IMPV), all of which are Buy rated. FireEye continues to be Hold rated.