Why UBS Downgraded FireEye And Symantec, Yet Still Positive On Cybersecurity Space

UBS analyst Brent Thill published a report earlier on Monday in which he downgraded FireEye Inc (NASDAQ: FEYE) to Neutral from Buy and Symantec Corporation (NASDAQ: SYMC) to Sell from Neutral.

However, the firm still has a positive outlook on cybersecurity space overall and recommend Palo Alto Networks Inc (NYSE: PANW) as its best pick in the sector.

Thill was on CNBC recently to discuss why investors need to be more selective while investing in cybersecurity stocks.

Beneficial To Multiple Vendors

"We think the fundamentals are exceptional," Thill began. "The group is up 36 percent; FireEye is up 70 percent year-to-date. Just big runs."

He explained, "We are still fundamental fans; we think you want to be long a cyber basket, but you want to be more selective. And we have chosen Palo Alto as our best next generation platform play. We like Fortinet Inc on the GARP side, and there's a handful of small- and mid-cap names that we think are well-positioned for the trend."

Related Link: There's No More "Easy Money" In Cybersecurity Stocks

Thill continued, "So, we still see a really strong market that's going to benefit multiple vendors. There is no Amazon or Google of security and Cecils [sic.] are building cyber quilts, they can't take one vendor. But if there's one vendor that's going to walk out of this, we think, in the next couple of years it will be Palo Alto Networks."

No Binge Buying In Security

Thill was asked if he sees any slowdown coming in cybersecurity spending overall after 2015, if the rate at which breaches are happening currently slows down. He replied, "We don't see a slowdown right now. We were in the valley visiting over 20 companies just last week, and the common takeaway is there is no binge buying in security.

"Given the breaches that are happening, we don't see a fundamental slowdown," Thill concluded.

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