Cybersecurity stocks have pulled back hard this year, but Jim Cramer said Monday the space seems ready to "roar higher" thanks to possible mergers and acquisitions and growing demand for IT security.
The "Mad Money" host referenced comments from Hewlett-Packard CEO Meg Whitman last week, who said her firm seeks more exposure to the IT security space. Last month, Cisco Systems announced plans to purchase cybersecurity company Sourcefire for $2.7 billion.
Meantime, security protection needs have grown more complex with the proliferation of web applications, social media and video streaming. In turn, Cramer thinks more M&A deals are on the way.
So how do you play cybersecurity? Cramer likes two names in particular right now.
Palo Alto Networks: This software maker missed on earnings when it last reported in June, but Cramer noted the Street has since lowered its expectations, making its stock a buy. After all, Cramer thinks this is one of the fastest growing names in the sector and investors now have a chance to buy it at a more reasonable valuation. Cramer only recommends this stock for investors who can stomach the risk, though.
Fortinet: Though this stock has been hammered this year, Cramer noted the downward pressure are not due to competitive reasons, but because of macroeconomic weakness. The company sells a firewall that's built into a larger security package, giving it a niche with small and medium-sized businesses that wouldn't otherwise be able to afford a separate firewall. Cramer thinks it's a potential turnaround story, too, if the company is able to deliver on its guidance during its next earnings report in mid-October.