J.P. Morgan analyst Brian Essex has identified several security software companies with ties to Israel, in response to growing investor interest in companies exposed to the region. However, as tensions escalate following the recent attack by Hamas on Israel, these companies may experience increased pressure.
Check Point Software Technologies Ltd. (CHKP)
Shares of Check Point Software Technologies Ltd., headquartered in Tel Aviv, dropped 3.4% in premarket trading. Despite a three-day winning streak that resulted in a 3.2% rally, the company faces the most significant exposure among those analyzed by Essex. With 60% of its office space and 42% of its employees located in Israel, Check Point Software Technologies Ltd. may face additional challenges.
CyberArk Software Ltd.
CyberArk Software Ltd. experienced a 5.8% surge in its stock before shedding 2.7% the following day. The company maintains a substantial presence in Israel, with one of its headquarters based in Tel Aviv and 71% of its long-lived assets located in the country. The exact number of employees in Israel remains undisclosed.
Shares of SentinelOne Inc. slumped 1.5% and were the most actively traded among the group before the market opened. The California-based company has relatively meaningful exposure to Israel, which contributes to the market’s cautious sentiment.
As geopolitical events unfold, companies with operations in Israel are expected to handle regional disruptions adequately. However, headlines surrounding these companies within our coverage universe may continue to exert pressure.
Also read: Israel declares war, bombards Gaza as Hamas says it has more than 100 hostages.
The Influence of Israel on Cybersecurity Companies
SentinelOne’s Presence in Israel
SentinelOne, although not headquartered in Israel, has recognized the value of the country’s resources. In fact, 44% of SentinelOne’s long-lived assets are located in Israel, including a significant portion of its research and development activities based in Tel Aviv. This strategic decision highlights the abundance of talent and expertise available in Israel.
The First Trust Nasdaq Cybersecurity ETF
In light premarket trading, the First Trust Nasdaq Cybersecurity ETF remained relatively stable. However, it is vital to monitor its performance closely as developments in the cybersecurity sector continue to unfold.
Palo Alto Networks and its Israeli Connections
Palo Alto Networks, a California-based company, has strategically pursued acquisitions in Israel. Essex’s report emphasizes that several acquisitions made by Palo Alto Networks have been Israeli-based. Additionally, approximately 12% of the company’s long-lived assets are located in Israel. This serves as a testament to Israel’s significant contributions to Palo Alto Networks’ operations.
Other Companies with Israeli Ties
Several other companies within the cybersecurity industry have established roots in Israel. Rapid7 Inc., which operates an R&D office in Tel Aviv, was yet to commence trading during premarket hours. Similarly, Tenable Holdings Inc., known for its Israeli-based R&D operations and recent acquisition of a Tel Aviv-headquartered cloud security company, indicated a decline of over 2% in premarket trading. On the other hand, Zscaler Inc., conducting undisclosed R&D operations in Israel, experienced a modest increase of 1%.
In conclusion, Israel has positioned itself as a vital hub for talent and innovation in the cybersecurity sector. Companies like SentinelOne, Palo Alto Networks, Rapid7 Inc., Tenable Holdings Inc., and Zscaler Inc. recognize the immense value and benefits of establishing a presence in Israel. As the industry continues to evolve, Israel’s contributions are expected to play a crucial role in shaping the future of cybersecurity.