Cybersecurity stocks get battered as high-bar earnings season begins

Cybersecurity company earnings hit a rocky start as earnings began to flow in this week, struggling to meet high expectations brought on by elevated stock prices and a booming security market fueled by fat IT spending budgets and fears of hackers.

The ETFMG Prime Cyber Security ETF HACK, -3.41% finished the week down 4.2%, after a 3.4% loss Friday. The ETF, which is weighted heavily with stocks like Cisco Systems Inc. CSCO, -2.21% Palo Alto Networks Inc. PANW, -3.44%  and Check Point Software Technologies Ltd. CHKP, -2.65% is up 19% on the year, compared with a 5.4% gain for the S&P 500 index SPX, -0.66% and a 12.1% gain for the tech-heavy Nasdaq Composite Index COMP, -1.46% Additionally, the First Trust Nasdaq Cybersecurity ETF CIBR, -2.68%  finished the week down 3.1%, after a 2.7% decline Friday, and is up 16% for the year.

Check Point Software Technologies Ltd. CHKP, -2.65% had kicked off earnings for dedicated security companies Wednesday morning on a positive note, following up on a glimpse of how robust demand for cybersecurity products was from International Business Machines Corp.’s IBM, -1.06%  July 18 earnings report. While a relatively small part of its business, IBM reported that security revenue surged 79% from a year ago to top $1 billion in quarterly sales for the first time.

Check Point reported adjusted second-quarter revenue of $1.37 a share on revenue of $467.8 million, compared with the Street’s $1.31 a share on revenue of $461.4 million, bookended analyst expectations with its outlook range, and doubled its share buyback program to $2 billion.

That positive note didn’t last for long, however. Shares of Check Point closed down 2.7% on Friday, finishing the week up 1.8%.

The biggest loser on the week was Imperva Inc. IMPV, -15.61%  , after the company’s revenue fell

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