Who Wins From The EU's New Cyber Legislation?

On December 8, the European Commission, Parliament and Council announced a new European-wide cybersecurity agreement. The Buckingham Research Group analyst Rohit Chopra has since taken a look at which companies will be impacted most by the new legislation and what their shareholders can expect.

The Deal

The overall intent of the new agreement is to improve cooperation and cybersecurity among EU countries. The legislation establishes minimum cybersecurity standards for essential services providers and requires them to report all cybersecurity incidents.

According to Chopra, the new legislation will likely require many large European organizations to beef up overall cybersecurity. “In our view, legal repercussion and enforcement are likely to coerce large organizations operating in Europe to enhance their cybersecurity capabilities,” Chopra explained.

Related Link: Adding Some Volatility To The Cybersecurity ETF Trade

Impact

The new agreement, if it becomes law, would go a step further than the current cybersecurity agreements that are currently in place throughout Europe, which do not require minimum security standards.

It might be a while before this change takes place, however, as the process of getting the agreement made law could be a lengthy one. Buckingham noted that formal approval of the agreement will likely not happen until February or March, and then participating countries will have 21 months to implement the new rules.

Winners

Buckingham sees cybersecurity pure-play stocks with European exposure as the biggest beneficiaries of the new deal. Buy-rated Imperva Inc IMPV and Fortinet Inc FTNT have the most exposure to EMEA countries at 42 percent and 35 percent, respectively. Buckingham also has a Buy rating on Palo Alto Networks Inc PANW.

Disclosure: The author holds no position in the stocks mentioned.