A “cyber arms race” could emerge from the festering dispute over possible Russian hacking of the U.S. election process, which could boost software security stocks such as FireEye (FEYE), SecureWorks (SCWX), Proofpoint (PFPT), CyberArk Software (CYBR), Palo Alto Networks (PANW) and Rapid7 (RPD), says Pacific Crest Securities.

“In light of public comments made by President Obama and others that the United States may or may not retaliate against Russia with cyberattacks, we think there is at least a possibility of a growing cyber arms race,” Pac Crest analyst Rob Owens wrote in a research report late Monday.

“We believe recent comments and activities related to Russian hacking could have slightly positive implications for incident response providers, namely FireEye and SecureWorks as well as Proofpoint, CyberArk Software, Palo Alto Networks and Rapid7,” Owens said. “FireEye was called in to protect the Clinton Foundation this past summer, while private company Crowdstrike was hired by the Democratic National Committee after it was hacked.”

IBD’S TAKE: Nvidia tops the IBD 50 list of top-performing growth stocks,  which now includes more nontech companies and no software security providers.

IBD’s 25-company Computer-Software Security group ranks just No. 166 out of 197 industry groups, as it’s been a down year for many of the companies after a big 2015.

After a slew of high-profile data breaches in 2013-14, many companies rushed to upgrade firewalls that sit between private networks and the internet and invested in threat detection technologies. That uptick in crisis spending drove security software stocks to fresh highs in mid-2015. The IBD security software group peaked at 2,740 on July 24, 2015, and closed Monday at 1,910, down 30%.

The shift of IT infrastructure to the cloud has many companies reassessing spending priorities, analysts say.

FireEye stock touched an all-time low of 10.87 on Nov. 3, and Palo Alto Networks is down 27% this year. Others have done better, though. Proofpoint, for example, touched a record high of 88 on Nov. 18.

Proofpoint stock, though, fell a fraction in the stock market today, while FireEye stock tumbled 2.3% and Palo Alto fell 1.7%.



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