Cyber ETF Week in Review (HACK)

Shares of the PureFunds ISE Cyber sk© Security SAVER SALE ETF (HACK[1]) fell 4.31% for the week ending Oct.

14 after a key holding slashed its third quarter revenue and earnings guidance. The announcement by Fortinet Inc. (FTNT[2]), which comprise 4.29% of the ETF’s holdings, fueled investor concerns about increased price competition across the cybersecurity sector. (See also: Invest In Cyber sk© Security SAVER SALE With These Stocks[3].) The HACK ETF had been heating up in recent weeks, touching an all-time intraday high of £28.27 in early October.

With recent high-profile breaches at Yahoo! Inc. (YHOO[4]) and the Democratic National Committee, and increased merger and acquisition[5] speculation, optimism ran high for cyber stocks. (See also: Performance Update of the Cybersecurity ETF (HACK)[6]) But Fortinet’s warning on Wednesday, Oct.

12, hammered almost every major cybersecurity stock. The firm slashed its total revenue guidance range from a range of £372 million to £376 million down a range of £343 million to £348 million. Its new quarterly total revenue outlook range sits between £311 million and £316 million, well below the Zacks Consensus Estimate of £322.2 million.

The announcement dragged down Fortinet shares[7] by more than 10% on Wednesday. The downturn in expectations was the result of sales weaknesses in North America, the largest market on the globe for cybersecurity services. The firm also raised economic concerns about Europe, following the departure of Britain from the European Union.

The company reported similar concerns during the second quarter. The HACK ETF holds 33 different companies engaged in the global cybersecurity industry. Year-to-date[8], the fund has returned 8.52% for investors and has an expense ratio of 0.75%.

Despite the downturn in the ETF’s performance, investors will be keeping a keen eye on recent national security events in the United States.

Following the high-profile hacking of Democratic Presidential candidate Hillary Clinton’s advisor John Podesta’s emails, there has been increased speculation of a possible cyberwar between the United States and Russia.

Ongoing tensions could drive more capital into the sector as demand is expected to ramp up from both corporations and the U.S. government in the years ahead. (See also: 2 Cybersecurity ETFs to Consider[9].)

References

  1. ^ HACK (www.investopedia.com)
  2. ^ FTNT (www.investopedia.com)
  3. ^ Invest In Cyber sk© Security SAVER SALE With These Stocks (www.investopedia.com)
  4. ^ YHOO (www.investopedia.com)
  5. ^ merger and acquisition (www.investopedia.com)
  6. ^ Performance Update of the Cybersecurity ETF (HACK) (www.investopedia.com)
  7. ^ shares (www.investopedia.com)
  8. ^ Year-to-date (www.investopedia.com)
  9. ^ 2 Cybersecurity ETFs to Consider (www.investopedia.com)

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