Cybersecurity Stocks: Russia’s Cyberwar Could Have Lasting Impact

Cybersecurity could be the theme of 2022 and stocks like Magnet Forensics (TSX:MAGT) should be on your radar.

| More on:

It’s been 19 days since Russian forces invaded Ukraine. Since then the world has focused on economic sanctions, fuel security, and military tactics. However, the cyberwar may have fallen under the radar.

Russia’s cyber capabilities are widely considered to be the most sophisticated in the world. As the conflict drags on, corporations and government agencies across the world may have to beef up their cybersecurity infrastructure. Investors could look to local Canadian cybersecurity companies playing a key role in this battle. Here’s what you should know.

Russia’s cyber capabilities

Russia is widely believed to have sophisticated cyber warfare tools in its arsenal. Kremlin-backed hackers could be capable of shutting down key pieces of infrastructure such as gas pipelines and energy grids. They could also block online information, steal data, extract money, or spread propaganda online. 

There are concerns that Russia-linked attacks may have already started and could escalate as the conflict drags on. To protect our economy, the government and business community may have to expand their budget for cyber defense. That could make cybersecurity stocks an interesting investment option.

Cybersecurity stocks

The government relies heavily on commercial partners to secure our digital infrastructure. These cybersecurity technology companies have received little attention in recent years, but that could change with the ongoing conflict.

Ontario-based Magnet Forensics (TSX:MAGT) is a good example. The company’s software helps digital forensic professionals track and respond to vulnerabilities. It also offers automation tools that can help companies or government agencies quickly patch these vulnerabilities if detected. 

Year-to-date, Magnet’s stock is down 20%. It’s now worth just over $1 billion. However, the company’s growth was steady and robust long before the invasion and greater cybersecurity threats emerged. Revenue was up 37% in its most recent quarter. Meanwhile, annual recurring revenue expanded to $61.3 million. Gross margins remained steady at 93%. 

Another potential cybersecurity stock is Absolute Software (TSX:ABST)(NASDAQ:ABST). The Vancouver-based firm offers a wide range of tools ranging from data surveillance to insider threat prevention. Its list of clients includes government agencies, health care facilities, and educational institutions. 

Absolute is half the size of Magnet with a market capitalization of just $500 million. However, the valuation is arguably more attractive. Absolute Software’s stock trades at a price-to-sales ratio of just 2.9. 

Both these stocks should be on your radar for the near future.

Bottom line

Investors under-appreciate the risk of cyberwar. Russia has advanced tools that could cause severe damage to our economy, financial system, and critical infrastructure. As the war in Eastern Europe drags on and sanctions escalate, the need for cybersecurity could grow. 

This risk could already be on the radar for major corporations and government agencies. Institutions could boost their cybersecurity budgets in the months ahead, which is a potential tailwind for companies like Magnet Forensics and Absolute Software. Investors should keep an eye on this trend as it develops. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends Absolute Software Corporation and Magnet Forensics Inc.

More on Tech Stocks

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

happy woman throws cash
Tech Stocks

3 Growth Stocks That Could Be Long-Term Wealth Creators

These three growth stocks aim to grow their financials at a higher rate than the industry average, thus delivering superior…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is POET Technologies a Top AI Stock for Canadian Investors?

Canada has relatively few AI stocks, and the ones it has are different from American AI stocks in terms of…

Read more »

Rocket lift off through the clouds
Tech Stocks

2 Growth Stocks That Could Skyrocket in 2025 and Beyond

Wondering what types of stocks could rapidly rise in 2025? Check out these two stocks with substantial upside if they…

Read more »

up arrow on wooden blocks
Tech Stocks

The 3 Smartest Tech Stocks to Buy With $500 Right Now

Tech stocks can be seen as a bit risky, but these three have far less risk and more stability for…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

Shopify: A Must-Have Growth Stock for Your TFSA Now (and the Next 10 Years)

Shopify (TSX:SHOP) stock isn't just a top growth company, it's a titan worth owning in your decades-long TFSA fund.

Read more »

cloud computing
Tech Stocks

Best Stock to Buy Right Now: Manulife vs CIBC

Want the best stocks? These two are certainly the best options. But which is the better buy?

Read more »

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »