Published By: Wallace Witkowski
“Peak cybersecurity demand has passed and investors need to get selective about their stock picks in the sector, as it remains to be seen whether a slowdown in spending is because businesses are gun-shy with a possible recession looming or if they just loaded up early on new services.
Morgan Stanley analyst Hamza Fodderwala said the sector is “bending but not breaking” going into 2023. Given recent hacks, information security will be the item least likely to be cut on a company’s capital expenditures budget. Even so, as companies seek to weatherize themselves against a possible recession, the pressure to keep expenses low is evident in the waves of layoffs that are hitting the tech sector.
“The slowdown in security is just starting,” Fodderwala said, and macroeconomic conditions and year-ago comparisons will “remain difficult” through 2023. While stock valuations reflect this, Fodderwala said it will take estimates take longer to hit bottom.”
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