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Could ‘More Nimble’ Security Rivals Swipe Qualys’ Market Share?

DA Davidson analyst Jack Andrews likened Qualys’ ( QLYS ) disappointing Q4 to the 1994 action flick “Speed.” And even Keanu Reeves and Sandra Bullock would struggle to pilot this speeding vehicle. “Qualys reminds us of an automobile driver who is trying to simultaneously replace critical engine parts while maintaining an appropriate speed limit on a busy road,” Andrews wrote in a research note Tuesday. “There are simply too many moving parts to fully support a buy rating.” Andrews downgraded Qualys stock to neutral and cut his price target to 25 from 51. At least three other analysts slashed their price targets on Qualys stock after the cloud security vendor late Monday reported Q4 and 2015 sales that missed Wall Street views. Its Q1 guidance also lagged the consensus. Qualys stock was down 23% in afternoon trading in the stock market today , hitting a 30-month low near 17. For Q4, Qualys reported 21 cents earnings per share ex items on $44.4 million in sales, up 40% and 21.5%, respectively, from the year-earlier quarter. EPS topped expectations for 17 cents, but sales missed the consensus of 16 analysts polled by Thomson Reuters for $44.6 million. Qualys ended the year with $164.3 million in sales and 70 cents EPS ex items. Current-quarter sales guidance for $44.7 million to $45.4 million would be up 20% at the midpoint, but that’s more than $1 million short of the consensus. EPS guidance for 14-16 cents missed Wall Street views for 18 cents. New Products Could Buoy Growth Last quarter was Qualys’ slowest in more than two years, Pacific Crest analyst Rob Owens noted in a research report. Owens rates Qualys stock as sector weight. Vulnerability management (VM) comprises 78.7% of Qualys’ Q4 sales and grew 18% vs. the year-earlier quarter and 19% for the year, Credit Suisse analyst Sitikantha Panigrahi wrote in a report. Noncore products — Web application scanning, policy compliance and Web application firewall — rose 35% year over year in Q4, but decelerated sequentially from 40% growth in Q3 and 50% in Q2, Panigrahi wrote. Panigrahi reiterated his outperform rating on Qualys stock but cut his price target to 35 from 45. But Summit Research analyst Srini Nandury reiterated his buy rating on Qualys stock but dropped his price target to 35 from 50. Nandury expects at least 20% near-term sales growth on new product launches this month. The new series will be based on Qualys’ ElasticSearch capabilities and Cloud Agent platform, Qualys CEO Philippe Courtot said in the company’s earnings conference call. “Many businesses are yet to deploy VM solutions in any meaningful way,” Nandury wrote in a report. “Upcoming products are expected to contribute meaningfully by year-end.” Security Stocks Hit In High-Tech Sell-Off Yet, Pacific Crest’s Owens questioned whether Qualys could maintain its VM leadership in a tough market. IBD’s 41-company Computer Software-Security industry group closed down nearly 7.2% Monday, after falling 7.4% Friday. The group was down another fraction midday Tuesday and touched its lowest point since June 2014. “We continue to believe that Qualys is beginning to cede share to smaller, more nimble competitors in their core VM space, and that others may offer a stronger value proposition with their complementary solutions and messaging,” Owens wrote. Smaller rivals include Rapid7 ( RPD ) — a $408 million market value to Qualys’ $609 million — and privately held Beyond Security, Critical Watch, Core Security, SAINT, Tenable Network Security and Tripwire. Owens added: “While everything is ‘on sale’ in this bear market, we prefer names that could offer more upside should things stabilize.” The unstable stock environment got no help last week from weak quarterly reports from LinkedIn ( LNKD ) and Tableau Software ( DATA ). Cybersecurity competitors Palo Alto Networks ( PANW ) and Proofpoint ( PFPT ) were recovering somewhat Tuesday, both up 1% Tuesday afternoon, but FireEye ( FEYE ) stock was down 2.5% Tuesday afternoon, after falling 9.5% Monday.

As Apple Ad Blocking Spreads, Wired Curbs Access To Ad-Block Users

Five months after Apple ( AAPL ) opened the door to ad blocking on mobile devices, news site Wired has become the latest publication to charge users who have installed ad-blocking tools. “We know that you come to our site primarily to read our content, but it’s important to be clear that advertising is how we keep Wired going: paying the writers, editors, designers, engineers and all the other staff that works so hard to create the stories you read and watch here,” Wired told its readers in a post Monday. The publication said 20% of its traffic comes from readers who are blocking its website ads. Wired said visitors using ad blockers will not have full access to articles on its site. It said website visitors can either agree to see ads or pay about $1 a week for an ad-free subscription. Some media firms, including Comcast ( CMCSA )-owned NBC, will not allow people using ad blockers to watch videos on their sites, while the Guardian and the Washington Post are among media sites that are prodding people who use ad blockers to pay for subscriptions instead. Support for ad blocking built into Apple iOS 9 means that iPhone and iPad users can install ad-blocking services from the Apple App store. Those products give people the power to pull the plug on Web advertising, including banner ads, pop-up ads and auto-play videos. About 16% of the U.S. online population blocked Web ads during Q2 2015, according to a September study by Adobe Systems ( ADBE ) and PageFair. Ad blocking could could cost publishers $41.4 billion globally this year, up from $21.8 billion in 2015, according to that study. There Is No ‘Free’ Internet “There has never been any such thing as free Internet, as users either pay with cash or with personal data/advertising. The experience is ‘free,’ but a return is earned by using users’ personal data to generate advertising or relevant marketing,” wrote Edison Investment Research analyst Richard Windsor in an industry note Tuesday. “The problem is that virtually all users who are paying with personal data do not realize that they are actually paying for the services that they consume.” For consumers, Windsor said, being expected to pay for services they’d been getting for free “is seen as a huge price increase, rather than paying for the service in a different way. Because paying with personal data has been almost invisible to many users for many years, it has perpetuated the myth that the Internet is free,” he wrote. Windsor added that “with many legitimate and well-respected businesses that depend on advertising to make a living, the threat of having it cut off could put them out of business.” He says users will likely turn off their ad blockers without much fuss. He also said he sees “no threat to the revenues of Alphabet ( GOOGL )-owned Google, Facebook ( FB ), Twitter ( TWTR ) and so on.” On those “walled garden” sites, ads are already fashioned to look like other content on the site and are embedded in news feeds and blog pages, and they aren’t blocked. Some other analysts, though, say the rise of ad blocking could shift more ad spending to apps rather than traditional online ads, where Google dominates. Google is facing increasing search-ad competition from Microsoft ‘s ( MSFT ) Web portal Bing, Internet search engine Yahoo ( YHOO ) and e-commerce king Amazon.com ( AMZN ), which has boosted its own direct search offerings as Google moves forward with its search-based Google Shopping service. Image provided by Shutterstock .

Cognizant ‘Throws Gas’ On Fire Burning Software Stocks

A big outsourcing company with a broad landscape, Cognizant Technology Solutions ( CTSH ) threw “gas on a bonfire” burning software stocks by warning of weakness in information technology for the banking and health care industries, said investment bank Evercore ISI. “Cognizant specifically highlighted a weakened demand environment in the financial services and health care sectors as key drivers behind disappointing” Q1 and 2016 guidance, Evercore ISI analyst Kirk Materne wrote in a research note Tuesday. Cognizant on Monday posted Q4 earnings that beat analysts, but it disappointed investors with guidance below Wall Street estimates, sending Cognizant stock down 7.7% Monday. And Cognizant stock was down another 3.3% in midday trading in the stock market today , at a 13-month low near 52. IT business process outsourcing (BPO) rivals Infosys ( INFY ) and Accenture ( ACN ) were each down about 2% midday Tuesday. And IBM ( IBM ) stock was down more than 1.5% Tuesday. Its new IBM Watson Health is geared specifically to getting hospitals and medical practices migrating toward better electronic health records. Health care software vendor Athenahealth ( ATHN ), which has been struggling near seven-month lows, was down 1%. “Rising medical costs, consumerization of health care and a changing regulatory environment, among other things, are driving industry consolidation in the payer industry,” said Cognizant President Gordon Coburn in the company’s earnings conference call with analysts. “We’re seeing some slowdown in our health care practice due to this consolidation, particularly in the early part of this year, as reflected in our Q1 guidance. “That said, we remain optimistic about the long-term opportunities within the payer segment and are quite encouraged by the large deal pipeline in this area for 2016. As the health care industry shifts from fee-for-service to value-based care models, health care organizations are simultaneously looking for new ways to deliver consumer-centric care while driving operational efficiencies.”