Facebook Could Be a Boon for These Cybersecurity Stocks

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It’s been a rough year for Facebook Inc. (NASDAQ: FB).

Trust in the social media giant has plunged in the wake of two major scandals surrounding cybersecurity and sensitive consumer information.

A recent hack exposed data of nearly 30 million people, while the firm faced considerable criticism in the wake of the Cambridge Analytica scandal from the 2016 election.

Since January, Facebook stock has fallen over 18%.

However, it looks like the tech giant is looking to turn over a new leaf.

This week, reports leaked that Facebook is considering a potential acquisition of a cybersecurity firm.

With $42 billion in cash on hand, this play is certainly in the cards. However, determining which cybersecurity firm Facebook will buy is another thing entirely.

We’ve identified two companies that are likely acquisition targets for Facebook. They’re both firms that can effectively address Facebook’s cybersecurity issues and generate huge returns for shareholders if Facebook buys them…

Facebook Acquisition Target, No. 2: Proofpoint Inc.

Various reports have indicated that Facebook is seeking to purchase a company that would identify and flag spammers and other suspicious online activity.

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This is more of a niche sector of the security industry, one that centers on private tools and account securitization. For this reason, the firm might turn its attention to a private start-up in this space.

One public company that has strong background in addressing phishing scams is Proofpoint Inc. (NASDAQ: PFPT).

Proofpoint may be very attractive to Facebook given its expertise in big data analytics, machine learning, identity and policy, secure storage, intelligent message routing, and threat intelligence services.

Because Facebook is likely to expand into these other areas in the future, Proofpoint could serve as a perfect stepping stone for Facebook’s transition into cybersecurity.

Proofpoint currently trades around $83. But if Facebook ends up backing the firm, shares could skyrocket.

However, this next company is by far the likelier contender for acquisition…

Facebook Acquisition Target, No. 1: FireEye Inc.

FireEye Inc. (NASDAQ: FEYE) is a cybersecurity firm with a track record of addressing significant security breaches.

Last year, FireEye was responsible for uncovering a massive “influence operation” that targeted social media users around the globe.

In addition, the firm has successfully investigated high-profile breaches like the ones that hit JPMorgan Chase & Co. (NYSE: JPM), Sony Corp. (NYSE: SNE), and Target Corp. (NYSE: TGT).

Given the company’s success, this merger could be the most obvious for the social media giant.

FireEye would give Facebook one of the top cyber investigative teams on the planet.

The company’s valuation sits at just $3.4 billion, and it remains cheap compared to its competitors. The stock is still trading below its $20 IPO price.

Buying FireEye at its current share price of $17.28 could get investors in on the ground floor of a potential Facebook acquisition target.

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