Russia’s Swift Exclusion Could Spur Cyber Attacks. 10 Stocks That Could Benefit.

Tensions ratcheted up over the weekend, with Russian President Vladimir Putin putting his country’s nuclear forces on high alert as a new wave of sanctions rolled in from the U.S. and allies in Europe and around the world.

The toughest sanctions so far are financial in nature, including freezing the foreign reserves of the Russian central bank. Some Russian banks have also been shut out of the global financial system and excluded from Swift, which is the world’s primary cross-border payments network and ubiquitous among financial institutions.

Worries are bubbling to the surface that the Swift exclusion could complicate or impede commodity transactions, leading to a surge in oil prices.

Retaliation from Moscow is another possibility — and cyber warfare is on the agenda. Russia has emerged as a powerful force in the cyber space over the past decade, and already has launched digital attacks on Ukraine in this conflict.

“With the historical move by the U.S., Europe, and Canada to remove select Russia banks from the Swift global financial/messaging system and Russian central bank sanctions, we now expect unfortunately a significant ramp-up of cyber warfare by Russian nation-state backed organizations over the coming weeks,” Wedbush analyst Dan Ives said in a note over the weekend.

Ives noted that the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency has issued a “shields up” warning, putting IT departments on high alert for cyber attacks.

“We have seen a lot of advanced cyber protection activity over the weekend as more organizations/enterprises/governments put sophisticated cyber defenses up ahead of what likely will be a cyber attack escalation at U.S./European enterprises with a focus on financial institutions among other key verticals,” Ives said.

The team at Wedbush see “significantly elevated” cyber attacks on the horizon as adding growth tailwinds to the cybersecurity sector, which the analysts had projected to grow more than 20% this year even before the conflict in Ukraine broke out. 

Russian cyber aggression could focus on data centers, networks, vulnerability points, sensitive data, and denial of service attacks, according to Wedbush research, which cited conversations with company executives and sources around Washington.

“Well-positioned vendors should be a focus sector for tech investors during this market turmoil,” Ives said.

Wedbush likes 10 names in the sector: Palo Alto Networks (ticker: PANW), Zscaler (ZS), CrowdStrike (CRWD), Tenable Holdings (TENB), Varonis Systems (VRNS), Fortinet (FTNT), Telos (TLS), Mandiant (MNDT), Palantir Technologies (PLTR), and CyberArk Software (CYBR).

Ives isn’t alone in being bullish on these stocks; Wall Street generally likes them. Of the group of 10, all but two have an average broker rating of Buy, according to FactSet data. Palantir and Mandiant both have average ratings of Hold, but the consensus target price on the stocks still implies upside of 8% for Palantir and 2% for Mandiant.

The potential is even better for the others. The average target price among analysts for Palo Alto Networks stock suggests near 10% upside, with Zscaler set to climb 49%, Crowdstrike 50%, Tenable 27%, Varonis 42%, Fortinet 11%,CyberArk 27%, and Telos a whopping 105%. Even more moderate gains would still be significant.

“It’s a matter of when not if this increased cyber warfare activity now kicks into the next gear,” Ives said. “In a very nervous investing backdrop for tech, we believe the cyber security sector is a clear pocket of strength that we would be overweighting at current levels.”

Write to Jack Denton at jack.denton@dowjones.com