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How AWS, Azure, Google Cloud Adoption Will Impact The Security Market

Close on the heels of Fortinet Inc FTNT 0.05% announcing a downbeat earnings forecast for the third quarter, Deutsche Bank examined the impact of cloud adoption on the security sector. The firm thinks that Palo Alto Networks Inc PANW 2.45%, Check Point Software Technologies Ltd. CHKP 1.06%, Fortinet, FireEye Inc FEYE 2.14% and others should have no alternatives but to change their tactics.

In the next five to 10 years, analysts Karl Keirstead and Imtiaz Koujalgi see significant rise in cloud adoption of Amazon.com, Inc. AMZN 0.85%'s AWS, Alphabet Inc GOOG 1.2% GOOGL 1.09%'s Google Cloud and Microsoft Corporation MSFT 0.14%'s Azure. This would force those in the security sector to become in line with the growing cloud adoption.

Related Link: How Does Amazon's Holiday Hiring Stack Up Against Brick-And-Mortar Stores' Hirings?

The brokerage thinks that the pricing model is set to change even as the competition would come from cloud service providers like AWS-optimized vendors. The firm pointed out that several initial customers of AWS are happy with its security apps with potentials to improve. However, this could change citing more critical workload shift to AWS.

Therefore, it would be a question of who wins and losses. In a research note, the analysts said, "Among the larger-cap firms, Check Point and Palo Alto Networks appear to be ahead of Cisco Systems, Inc. CSCO 0.77%, Juniper Networks, Inc. JNPR 1.09% and FireEye in launching AWS-optimized products, while Fortinet may incur a higher performance penalty on its virtual products given the loss of the ASIC chip advantage."

The brokerage kept a Buy rating on the following stocks:

The following stocks are maintained with a Hold rating:

At Last Check ...

  • Alphabet (GOOG) was down 1.19 percent at $776.81.
  • Alphabet (GOOGL) was down 1.11 percent at $802.75.
  • Amazon was down 0.84 percent at $827.08.
  • Check Point was down 0.99 percent at $76.01.
  • Cisco was down 0.82 percent at $30.09.
  • Cyberark was down 2.10 percent at $47.08.
  • FireEye was down 2.14 percent at $12.83.
  • Fortinet was down 0.55 percent at $30.49.
  • Imperva was down 1.72 percent at $49.63.
  • Juniper was down 1.15 percent at $23.21.
  • Microsoft was down 0.11 percent at $57.04.
  • Palo Alto was down 2.38 percent at $150.55.
  • Proofpoint was up 0.33 percent at $69.75.

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DateFirmActionFromTo
Oct 2016SunTrust Robinson HumphreyMaintainsNeutral
Oct 2016Morgan StanleyMaintainsOverweight
Sep 2016JMP SecuritiesMaintainsMarket Outperform

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