Israeliness on Wall Street. Palo Alto up 109% since the beginning of the year: "Became the world's largest in its field"/screenshot, PR
The wars between Israel and Ukraine have increased the number of cyberattacks on Western countries and the interest of investors in them, especially the interest in Israeliness among them.
The high interest rate barriers, the legal reform, and the various security challenges facing Israel have not stopped the growing flow of investments in Israeli technology companies, which accounted for about 51% of the total value of acquisitions and IPOs of Israeli technology companies in 2023. This is according to a report by accounting and consulting firm PWC Israel.
According to the report, about $3.8 billion was invested in 19 deals in the Israeli cyber field, out of NIS 7.5 billion invested in 45 deals in all areas of Israeli technology and innovation this year (until December 3, 2023).
The report also noted that 10 of the 12 deals worth $200 million or more were from the cyber world, and excluding the offerings of beauty tech company Oddity, which is also the parent company of Eyal Maciaj, and Freightos, which develops automation systems for shipping goods and cargo, cyber companies accounted for 100% of all these transactions.
Check Point's 30th anniversary. The company has limited activity in the field of cloud, and therefore grew less than the others/ Courtesy of Check Point
The trend is also evident in the stock market, where the three prominent Israeli cyber companies traded on Wall Street have risen by about 16% on average since October 7, and by an average of 61% since the beginning of the year. This is in contrast to the rise experienced in the US Nasdaq and S&P500 indices, which have risen about 6% since October 7, and about 34% and 19% since the beginning of the year, respectively.
CyberArk has been leading the gains since October 7 with a 22% jump in its share price (see table), and Palo Alto shares have taken the lead since the beginning of the year with a 110% jump in its share price for the period.
It should be noted that the three companies listed in the table experienced a mixed trend that amounted to a decline of 4%-7% from October 7 to the last week of the same month, but since then they have returned to an upward trend, as mentioned.
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Vaschunok. "The sector has been growing rapidly since the report of the Russian hacker attack on the 2016 U.S. election."
Sergei Vaschunok, a senior analyst at Oppenheimer Investment House, told Walla! "In the cyber field, Israeli companies have a relative advantage in the international arena, and they have become market leaders, with Palo Alto becoming the largest company in the world in this field.
"The advantage stems from several aspects, the main ones of which concern the emergence of veterans of an Israeli security past that focuses on innovation, such as graduates of 8200 and similar units, and the fact that the field lacks economies of scale. In this sense, there is no technological giant, such as Microsoft, Google or others, that occupies the business environment while the other companies work to serve their products or as a kind of niche for them.
"This gives an advantage to Israeli companies that come small to begin with, and it opens up more possibilities for mergers and acquisitions. Palo Alto, for example, has acquired quite a few Israeli companies and startups in the field, and each year makes about 5 relatively large acquisitions. Only about a month ago we were informed of its acquisition of Israeli cyber Talon for $625 million, and about a week earlier of its acquisition of Fishing Security for $315 million.
"Although the trend of growth in the field has accelerated in recent years, and the recent wars have indeed put a brighter spotlight on them, the field has been growing rapidly since the report on the Russian hacker attack on the 2016 US election. Awareness has only increased since then with a slew of attacks on various businesses and government organizations, such as those we experienced in Israel on hospitals and health organizations.
"The Ukraine war, which began in February 2022, has only sharpened the defensive need of a variety of organizations and businesses, and the fierce Israeli war sharpens the spotlight on Israeli companies in the field, which have developed the necessary expertise in recent years with the warming of the Cold War between the US and China and Russia, the geopolitical threats facing North Korea, etc.
The war in Ukraine. Hackers continue to try to damage infrastructure, government and business facilities in Western countries/Reuters
"Hackers continue to try to damage infrastructure, government and business facilities in Western countries, and defense continues to work, with increasing demand. At the same time, there are several important trends today in the cyber field, which also explain the variance in the business and share growth rates of each of the companies.
"The preference observed in recent months among investors is for cyber companies whose main activity is in the field of cloud and AI, with the former affecting the latter. This is mainly what distinguishes Palo Alto and CyberArk, for example, from Check Point, where recently there has been limited activity in the field of cloud, and the former have more extensive activity.
"This is one of the main reasons attributed to Check Point's relatively low growth vis-à-vis other companies in the industry, which amounted to single-digit percentages compared to the other two companies that showed double-digit growth.
"The move to the cloud is getting more attention from investors than traditional solutions, and AI, which opens fertile ground for new cyberattacks by lowering barriers to entry for hackers, is also raising the demand for safeguards.
"Dealing with AI security, it should be noted, is defined as one of the future areas of the cyber field and requires an infrastructure for dealing with the cloud.
"The spotlight is expected to strengthen in the direction of the cyber field in general and Israeli companies in particular, since cyber threats are only increasing, especially from the Russian and Iranian arenas, with which Israel already has experience. Therefore, the expectation is that companies in the field have many more goals to conquer, and investors in them as well."
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