MORGAN STANLEY: These 3 tech stocks are set to win big as companies spend more on cybersecurity in response to GDPR and other data regulation (CYBR, VRNS, SAIL, SYMC)

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Cybersecurity firms that address data governance concerns will be the big winners in 2018, as chief security officers figure out how to better comply with regulations like the European Union's GDPR, according to a survey published by Morgan Stanley.
In response to its survey, Morgan Stanley raised its price target on three cybersecurity companies: Varonis, SailPoint, and CyberArk, which all address specific governance issues on the minds of executives.
But Morgan Stanley lowered its target for Symantec, a longstanding leader in cybersecurity, in response to declining interest from companies in its end-point security product.

Morgan Stanley raised its price target on three security firms after a survey of IT executives indicated that data regulations like GDPR will drive big cybersecurity spending in 2018 and beyond.

In the 2018 State of Security Spending report, published Monday, analyst Melissa Franchi wrote that Varonis, SailPoint, and CyberArk will be the big winners as chief security officers (CSOs) scramble to ensure that their companies are compliant with data governance laws.

GDPR, the strict data regulations which went into affect in the European Union on May 25, impacts any and all companies which deal with the data of people residing in the EU. Of the CSOs surveyed, GDPR was the number one driver for increased security spend in 2018, up from being the number five driver in the 2017 survey.

Morgan Stanley Security Spending 2018 Morgan Stanley raised its price target for Varonis, a data governance company, from $63 to $73 following its survey. Franchi described the company as "one of the key beneficiaries of GDPR regulation given its well positioned data governance and insider threat solutions."

Interestingly, Morgan Stanley's target is down from the $77.85 that the stock opened at on early Monday. By close, shares were down nearly 7% to $73 flat.

It raised its target for SailPoint, an identity governance company, from $24 to $26. While only 9% of execs listed identity management as a top concern, Franchi said, this is up from the 2017 survey, and many companies will likely look to identity management to meet GDPR.

It also raised its target for CyberArk from $56 to $65. The self-described privilege access management (PAM) company will benefit from GDPR "as enterprises look to lock down privileged accounts that have access to systems/applications exposed to personal data," Franchi wrote.

Morgan Stanley also raised its bull case for the company ForeScout from $52 to $62 in response to executive interest in Network Access Control, though it kept its base case relatively "conservative." Its base price target remains $34.

The major exception to Morgan Stanley's price-raising spree was Symantec, a once-ubiquitous cybersecurity software provider which the survey indicated will lose considerable share when it comes to endpoint security and web security gateways in the next three years. "This raises some additional concern on the ability of Symantec to see improving enterprise security revenue growth," Franchi wrote.

Symantec currently has 8% of today's endpoint security spend, but Morgan Stanley expects this to drop to 5% in the next 36 months. For that reason, the firm dropped its target price for Symantec from $26 to $23.

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