Most U.S.-listed security-software stocks with notable operations in Israel dipped into the red as the country battles the Palestinian militant group Hamas.
Israel, considered a cybersecurity powerhouse, declared war over the weekend in response to Saturday’s surprise incursions from the Gaza Strip. The country is home to 33% of the world’s unicorns—usually defined as start-ups valued at $1 billion or more—in cybersecurity, the Israel National Cyber Directorate said last year.
The BlueStar Israel Technology exchange-traded fund (ticker:
ITEQ
), ITEQ which tracks Israeli cybersecurity companies and other tech names, was down 3.4% on Monday. Israeli tech companies “will be losing many of their key employees to the war effort, but these same companies have demonstrated extraordinary resilience in past conflicts,” wrote Steven Schoenfeld, CEO of MarketVector Indexes, who created the index behind the ETF.
For now, investors are pessimistic. Listed on the Nasdaq,
Check Point Software Technologies
(ticker: CHKP), which has the highest weighting in the ETF at 9.1%, lost nearly 3% at Monday’s open. It is based in Tel Aviv, with roughly 60% of its office space and 42% of its employees in Israel as of last year, giving it the most meaningful exposure to the country among the security-software companies covered by
J.P. Morgan
analyst Brian Essex and his team.
Identity-security company
CyberArk Software
(CYBR) also based in Israel, has 71% of its so-called long-term assets there. The category can include fixed assets such as equipment, as well as intangible assets such as copyrights and software. Its stock fell 5.3%.
SentinelOne
(S), while based in California, has 44% of its long-term assets in Israel, “with a portion of Research and Development based in Tel Aviv,” J.P. Morgan wrote. Shares of the cybersecurity company were down nearly 4%.
Many companies
Palo Alto Networks
(PANW) has acquired are based in Israel, including Cider and Cyber Secdo, but just 12% of the parent company’s long- lived assets are there. The stock was down 0.3% at open but had recovered for a gain of 2% by mid morning.
Stocks of other security-software companies listed by J.P. Morgan—
Rapid7
(RPD) and
Tenable Holdings
(TENB)—fell by percentages in the low single digits.
“As events continue to evolve, we believe companies with operations in Israel are well prepared to manage geopolitical disruption in the region, but we wouldn’t be surprised to see headlines pressure more exposed stocks within our coverage
universe,” J.P. Morgan wrote.
Write to Karishma Vanjani at [email protected].
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