Author Archives: Chris Versace, Chief Investment Officer

About Chris Versace, Chief Investment Officer

I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."
Thematic Reads: May 24, 2021

Thematic Reads: May 24, 2021

Thematic Reads

Each week Team Tematica consumes an immense quantity and range of content as we look to stay on top of the latest data and mine it for tailwind and headwind signals for our investment themes and indices.

Cleaner Living
Growing demand for items that claim to be better for you and the planet:

“Ford’s first electric pickup truck is here—and it’s ready to prove that anybody can own a battery-powered truck without sacrificing the important features that make a vehicle like this useful in everyday life. The 2022 F-150 Lightning amps up the utilitarian nature of a pickup, adding features like a unique front trunk and vehicle-to-home charging that make the ride unlike anything else on the market.”
The Ford F-150 Lightning is an electric vehicle for truck lovers

“Renewable power generation grew at the fastest rate for two decades in 2020 according to a new report from the International Energy Agency. 278 gigawatts of capacity was added last year, a 45 percent jump and the largest year-over-year increase since 1999. The growth was even more impressive given that it occurred in the midst of pandemic-induced supply chain challenges and construction delays.”
Renewable Energy Boomed In 2020

“California’s clean air regulator on Thursday adopted rules to mandate that nearly all trips on Uber’s and Lyft’s ride-hailing platforms have to be in electric vehicles over the next few years, the first such regulation by a U.S. state.”
California regulator adopts EV mandate for Uber, Lyft ride-hail fleets

Cyber Security & Data Privacy
Securing individuals and organizations against cyber threats and privacy violations:

“Ransomware especially has been in the spotlight recently and data from our own Unit 42 shows that the average ransom paid in 2020 tripled from 2019 and in 2021 it’s more than doubled again. The highest demand we’ve seen is $50 million, up from $30 million in 2020, with organized groups with near nation state discipline perpetrating coordinated attacks. The targets are not only corporations where healthcare and pharma is a focus with the pandemic, but also government organizations and shared infrastructure.
Palo Alto Networks (PANW) earnings conference call (May 20, 2021)

“CNA Financial, one of the largest US insurance companies, paid $40 million to free itself from a ransomware attack that occurred in March, according to a report from Bloomberg. The hackers reportedly demanded $60 million when negotiations started about a week after some of CNA’s systems were encrypted, and the insurance company paid the lower sum a week later.”
One of the US’s largest insurance companies reportedly paid $40 million to ransomware hackers

“To defend against these cyberassaults, more companies are going into the cloud. Per the Tracker, “Cloud systems do not provide ATO immunity, but they do offer some advantages. Four out of five survey respondents said that their cloud systems offered better visibility into attacks that bypass firewalls or other external security measures, allowing them to catch fraudsters in the act. Respondents’ biggest fraud-fighting frustration was the amount of time needed to manage security solutions, however.”
Hardening Merchants’ Digital Defenses Against Incursions From The Dark Web

“Stolen credentials play a major role in retail data breaches, according to the 2021 Verizon Data Breach Investigations Report. Study results indicate that the top cyberattack patterns found in the retail sector stem from system intrusion, social engineering (such as phishing), and basic web application attacks. Of the data compromised in 165 incidents with confirmed data disclosure, 42% of the breaches reported involved payment data (42%), followed closely by personal data (41%). Credentials (33%) and other data types (16%) made up the rest of the confirmed data breaches.”
Stolen credentials are a retail hacker’s best friend

“The audacious ransomware attack that shut down a major fuel pipeline and sent Americans scrambling for gasoline in the Southeast this week was not the first time hackers have disrupted America’s aging, vulnerable energy infrastructure. And it’s unlikely to be the last.”
Pipeline Hack Points to Growing Cybersecurity Risk for Energy System

Digital Infrastructure & Connectivity
The Buildout and upgrading of our Networks, Data Storage Facilities, and Equipment:

“When we think about the general consensus from third-party research, you’re at about $1 trillion of semiconductor revenues by 2030. The demand driving that is broad-based. You’re seeing a handoff from consumer-oriented devices to something that’s far larger and more substantive around this fourth wave of compute, the data economy. By 2025, machines will generate 99% of the data. Humans will generate 1%. You’re seeing a decoupling of semiconductor demand for the first time in the industry’s history from population and population growth in consumer behavior.”
Applied Materials (AMAT) earnings conference call (May 20, 2021)

“… we’re expecting a really healthy environment, you know, 5G, being one of the big drivers, and also for us, you know, with 5G comes content growth, you know, in it – in a 4G phone, DRAM, there’s 3 gigs to 4 gigs of DRAM in a 5G phone to get the 5G experience. A minimum of 6 gigs, and we’ve seen skews at 8, 10, or 12, at even 16 gigs. So, you know, this will be a great content story for us this year in an environment where I think 5G has a really good demand environment just at the end unit level. So, you know, for us the outlook looks great.”
Micron (MU) CFO David Zinsner at the 2021 Barclays Americas Select Franchise Virtual Conference (May 19, 2021)

“Radio component revenue reached an all-time high in 2020, according to Strategy Analytics, which expects revenue to grow through 2025.”
5G growing rapidly despite component shortages

“We are also seeing early momentum in the ramping of key technology cycles that are long-term growth drivers for our business, such as 5G, 400 gig and Edge… In our Webscale business, we delivered our sixth consecutive quarter of strong order growth, which increased over 25% in the quarter, and over 50% on a trailing 12-month basis. Our Webscale customers are starting their 400 gig upgrade cycles and aggressively pursuing long-haul build-outs while our Carrier customers are exploring new architectures to realize the full potential of 5G.
Cisco Systems (CSCO) earnings conference call (May 19, 2021)

Digital Payments & FinTech
Companies leveraging technology to disrupt and improve the financial services and payments industries:

“Several big American banks, including JPMorgan Chase, are signed up for a government-backed pilot using alternative data to get credit to people with low or no credit scores, according to the Wall Street Journal. About 53 million American adults do not have regular credit scores, says the firm behind Fico scores. The problem disproportionately affects Black and Hispanic people, according to the CFPB.”
US banks to pilot credit for people with no credit score

“NatWest is now allowing customers to set their own daily digital bank transfer limits – a move designed to reduce the damage done by APP scams. NatWest, Royal Bank of Scotland and Ulster Bank currently set a default bank transfer limit of £20,000 per day but this will be reduced to £5000 per day.
NatWest lets customers set daily bank transfer limits

“Visa research shows that enabling tap to pay on transit systems like these can be good for economic recovery, bringing more than a 15% lift in transactions from merchants in surrounding neighborhoods. MST is the fifth transit agency in the US to accept tap to pay for fares, following Chicago, Miami, New York and Portland, OR. MST is also the first public transit system in the country that is located outside of a large urban area to introduce tap to pay fares – demonstrating contactless payments as a good fit for any size agency looking to enhance the customer experience.”
Contactless Bus Payments Introduced in California by Monterey-Salinas Transit

“The financial crisis of a decade ago catalyzed many secular changes in the U.S. banking system, but few are starker than the collapse in new bank charters. According to data from the Federal Deposit Insurance Corporation (FDIC), between 2000 and 2008, well over 100 new bank charters were granted each year on average. A drought followed the financial crisis, however; between 2011 and 2016, just two charters were awarded in aggregate. Since 2017, the average number of charters granted has ticked up slightly but remains an order of magnitude shy of pre-crisis norms. Yet despite the broad disinterest in bank charters, we are seeing a surge of interest from an interesting source: fintech.
Banking On Fintech

Sustainable Future of Food
Companies addressing the challenge of providing healthy, affordable and nutritious food to a growing global population amid dwindling natural resources:

“Food manufacturer OsomeFood has debuted what it claims to be the world’s first nutrition-focused and plant-based hard-boiled egg, in an effort to provide consumers superfoods without the need of harming animals or compromising on health immunity benefits.”
Singapore Manufacturer OsomeFood Says It Has Created The World’s First Plant-Based Hard-Boiled Egg

“Spiking commodities costs are stirring up fears about food sustainability, and the trickle-down impact of higher prices on everything from cereal to peanut butter and chicken — which Cheerios (GIS), Skippy Peanut Butter (HRL) and Tyson (TSN) have all addressed recently. Still, interest in alternative foods is surging, with one vegan restaurant owner saying plant-based eating is ‘here to stay.’”
Plant-based protein is the ‘new wave’ after COVID-19

“In the scramble for a healthy alternative to cow’s milk that doesn’t cost the earth, a Singapore startup has developed a new type of dairy substitute made from microalgae. A claimed world-first, the algae-based milk is comparable in nutritional value to cow’s milk, but is made using a fraction of the energy, land and water.”
In the race for planet-friendly milk, Singapore startup substitutes dairy with algae

“We are seeing continued adoption on the precision ag front as you think about things like tractors, for example, with command center and premium activation. That’s grown pretty significantly this year, which is a positive trend. And we would expect as we move forward and we’re bringing out new products that, that trend would continue. Things like ExactRate, which will be coming through the early order program, See & Spray Select coming out as well.
Deere & Co. (DE) quarterly earnings conference call (May 21, 2021)

 

Tematica Research Indices

 

Thematic Reads: May 10, 2021

Thematic Reads: May 10, 2021

Thematic Reads

Each week Team Tematica consumes an immense quantity and range of content as we look to stay on top of the latest data and mine it for tailwind and headwind signals for our investment themes and indices.

Cleaner Living
Growing demand for items that claim to be better for you and the planet:

The clean movement is probably definitely the biggest thing to happen to the beauty industry in a long, long time. Just take a look around the next time you head to a major beauty retailer like Sephora, Ulta, or Target: Whole entire sections—both IRL and virtual—are now dedicated to showcasing the best skin, hair, and makeup products in the clean space.
Everything you need to know about the Clean Beauty movement.

Consumer habits are evolving, people have started to be concerned about what they are putting into their bodies, which in turn initiated a clean eating movement across the world. Now the emphasis pivots to what they are putting on their face. While commercial beauty brands are restructuring their beauty strategy, natural beauty products such as Tata Harper are feeding the needs of the new green consumer.
– The Rise In Clean Beauty Brands

House Democratic leaders are lining up behind a White House push to allocate $8 billion in taxpayer funding for the latest iteration of mail truck, paving the way for a fully electric fleet instead of the piecemeal strategy U.S. Postal Service leaders have been pursuing.
Push to electrify mail trucks gains wide support, an unlikely win for both DeJoy and Biden

Synergy Flavors (part of Carbery Group) has acquired savory flavor and ingredient supplier, Innova Flavors, from Griffith Foods Worldwide, ramping up its savory product development of plant-based alternatives.
Synergy Flavors acquires Innova Flavors fueling plant-based food and beverage product development.

Mercedes-Benz is giving a sneak peek of an electric van that’s among the models broadening its battery-powered range over the next year. The electric iteration of the Mercedes T-Class, dubbed EQT, will accommodate as many as seven passengers and launch in 2022, Daimler AG’s main division said Monday. It will flank the Citan commercial van due to be introduced later this year, a version of which will be battery-electric.
– Mercedes Unveils Electric Van for Growing Battery-Powered Lineup

 

Cyber Security & Data Privacy
Securing individuals and organizations against cyber threats and privacy violations:

A text-message scam that infects Android phones is spreading across the UK, experts have warned. The message – which pretends to be from a package delivery firm, prompts users to install a tracking app – but is actually a malicious piece of spyware.
Flubot: Warning over major Android ‘package delivery’ scam

Top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network after a cyber attack, the company said in a statement on Friday. Colonial’s network supplies fuel from U.S refiners on the Gulf Coast to the populous eastern and southern United States. The company transports 2.5 million barrels per day of gasoline, diesel, jet fuel and other refined products through 5,500 miles (8,850 km) of pipelines. Colonial Pipeline says it transports 45% of East Coast fuel supply.
– U.S. pipeline operator that transports 45% of East Coast fuel shuts entire network after cyberattack

Researchers on Thursday reported that despite a 50% increase in mobile device management (MDM) adoption during the past year, average quarterly exposure to phishing attacks on mobile devices in the financial sector rose by 125% – and malware and app risk exposure increased by more than five times.
– Financial sector saw a 125% increase in mobile phishing attacks during 2020

Apple (AAPL) recently rolled out its highly anticipated App Tracking Transparency feature with iOS 14.5, which lets users decide whether apps track their activity for targeted advertising. Overwhelmingly, users seem happy to leave app tracking disabled. Just 4% of iPhone users in the U.S. have agreed to app tracking after updating their device, according to the latest data from Verizon-owned analytics firm Flurry.
– Too Bad, Zuck: Just 4% of U.S. iPhone Users Let Apps Track Them After iOS Update

“Identity Security is at the center of every major industry tailwind, including digital transformation, zero trust, hacker innovation, and compliance. Digital transformation and the explosion of technologies applications and automation tools are not only blurring the line between a privileged user and a workforce user, but also between human users, applications and bots.”
CyberArk Software (CYBR) earnings conference call (May 5, 2021)


Digital Infrastructure & Connectivity

The Buildout and upgrading of our Networks, Data Storage Facilities, and Equipment:

This week I want to talk digital infrastructure, again. I say again because my most recent Financial Times column focused on the topic. In that column I probably was not as explicit as I should have been about why I think investors need to have some exposure to digital infrastructure. I am going to pass over the obvious demand drivers – you’d have to be in a cave not to understand what’s going on with the internet, digitalisation, 5G etc.
Stevenson: Put 10-20% of your assets in digital infrastructure

Cristiano Amon, the CEO-elect of mobile-phone chip maker Qualcomm (QCOM), rubs his hands in glee when you ask him to talk about 5G. And for good reason: The speedy new wireless standard is creating boom times for his San Diego–based company, which reported 52% revenue growth in its latest quarter.
Qualcomm Is a 5G Winner. Here’s Why the Company’s New CEO Is So Bullish on the Future.

The world’s digital connections are about to become broader and faster, providing a platform for every industry to boost productivity and innovation. We have identified hundreds of use cases across more than 17 commercial domains that can run on an enhanced digital backbone. This research focuses on four of them: mobility, healthcare, manufacturing, and retail.
– Connected world: An evolution in connectivity beyond the 5G revolution

“Globally, 5G deployment is still in an early stage given that less than 20% of the global operators that currently use LTE have deployed 5G. The U.S. and Northeast Asia markets continue to deploy 5G aggressively for both public and private networks.”
PC-Tel (PCTI) earnings conference call (May 9, 2021)

 

Digital Payments & FinTech
Companies leveraging technology to disrupt and improve the financial services and payments industries:

The pandemic has not only altered consumers’ shopping behaviors, but it’s also changed how they pay for goods and services. A significant number of people in the US were already using proximity mobile payments regularly before the pandemic—about 72 million in 2019, according to our estimates. As more consumers experimented with different forms of payment in 2020, however, the number of proximity mobile payment users in the US rose by 29.0% year over year to 92.3 million. We expect the user base to surpass 100 million this year and growth to continue steadily through the end of our forecast period in 2025.
– More than 100 million Americans will use proximity mobile payments in 2021

The Mastercard (MA) New Payments Index shows 95% of Middle East and North Africa (MENA) consumers will consider using at least one emerging payment method, such as cryptocurrency, biometrics, contactless, or QR code, in the next year. Over two-thirds of respondents (65%) agree they have tried a new payment method they would not have tried under normal circumstances, but the pandemic has galvanised people to try flexible new payment options to get what they want, when they want it.
– Mastercard’s Payment Index Shows 95% Of MENA Consumers Want To Try New Digital Payment Methods

The Monetary Authority of Singapore (MAS) and the Bank of Thailand (BOT) today launched the linkage of Singapore’s PayNow and Thailand’s PromptPay real-time retail payment systems. The first of its kind globally, the linkage is the culmination of several years of extensive collaboration between MAS and BOT, both countries’ payment system operators, bankers’ associations, and participating banks.
– Singapore and Thailand Launch World’s First Linkage of Real-time Payment Systems

The adoption of digitisation in trade finance has been something of a “slow burn” as practices have historically relied on the transfer of paper documents between involved parties and largely manual processes. This vitally important area of financial services has trailed behind the digitisation progress that has been made, especially in the last decade, in consumer and retail banking.
– Digitising trade finance: the next frontier for financial services innovation


Thematic Dividend All-Star
Combining the power of rising dividends and thematics.

The first quarter’s uptick in interest rates has some investors concerned about the potential for stock market headwinds. But unlike bonds, stocks often rise in value when interest rates increase. Dividend growth strategies that focus on companies with the longest track records of consistent dividend growth tend to be all-weather strategies that have performed well during a variety of interest rate environments.
– When Interest Rates Are Rising, Your Dividends Need To Be Growing


Sustainable Future of Food
Companies addressing the challenge of providing healthy, affordable and nutritious food to a growing global population amid dwindling natural resources.

Wunda is a ‘fully versatile’ milk alternative for baking, cooking, frothing, and drinking either hot or cold, according to Nestlé, who is rolling out the new brand in France, Portugal, and the Netherlands.
Nestlé develops pea-based alt milk with “neutral taste” for versatility

Tyson Foods is expanding its plant-based protein line Raised & Rooted into hamburger patties and grounds, bratwurst and Italian sausages.
– Tyson expands Raised & Rooted offerings further into competitive plant-based market

Two-thirds (67%) of consumers consider it important that the products they buy are in recyclable packaging, and the same percentage consider themselves environmentally aware — the same share as before the pandemic, according to Trivium Packaging’s 2021 Global Buying Green Report.
– Consumer demand for sustainable packaging holds despite pandemic

During the past 50 years, the world’s population has grown about 2.1 times, and consumption has grown more; for some goods, much more. Between 1968 and 2018 (the most recent year for which we have global data), production of both primary energy and of steel rose 3.4 times, that of meat grew 3.5 times, and that of grain grew 2.6 times. The total number of cars on the world’s roads rose sixfold, and the number of revenue-generating passenger-kilometers flown (an industry metric) grew by about 24 times. But the rise in aquacultural production beats them all.
– The Fabulous Growth in Aquaculture

 

Tematica Research Indices

 

Cybersecurity confirmation in March quarter earnings

Cybersecurity confirmation in March quarter earnings

We are in the thick of the March quarter earnings season and following a week of Big Tech earnings that included Apple (AAPL), Alphabet (GOOGL), Facebook (FB), and Amazon (AMZN), the coming week will be an earnings barn burner for constituents in the Foxberry Tematica Research Cybersecurity & Data Privacy Index (FXBYCYBR). One of the key tentpole investment thesis underlying the Cybersecurity & Digital Privacy index should once again be confirmed – as our lives become increasingly connected with accelerating 5G deployments, the expanded scope of connected devices and the internet of things will fuel demand for cybersecurity solutions. The groundwork for what we will hear in the coming weeks reflects the number of high-profile attacks early in the March quarter, the quarterly results and commentary from the handful of index constituents that have recently reported their quarterly results, and newly published reports discussing developments in the cybersecurity market.

10 major attacks during the March 2021 quarter

The COVID-19 pandemic accelerated the digital transformation that was underway for many companies as the adoption of work and learn from home, greater interconnectivity, and the shift to the cloud, all led to a surge in cyberattacks. Findings from Forrester consulting revealed companies felt they “had become more vulnerable” to cyberattacks since the start of the pandemic as total cyber losses among the affected firms rose to $1.8 billion, a 50% increase compared to the prior year. [1] A separate report from Hiscox found companies in the UK and Europe doubled cybersecurity spending to combat the increase in cyberattacks during 2020[2] but a finding published in the 24th Annual Global CEO Survey from PwC shows 47% of CEOs are concerned with cyber threats, up from 46% in 2020.

That increase in concern is understandable given the number of high-profile attacks that occurred during the March 2021 quarter:[3]

  • Threat actors actively exploited four zero-day vulnerabilities in Microsoft’s (MSFT) Exchange Server that resulted in at least nine government agencies and 60,000 private companies in the US alone being affected by the attack.
  • Computer giant Acer Inc. (ACEYY) suffered a ransomware attack and was told to pay a ransom of $50 million.
  • A data breach at aircraft company Bombardier (BDRBF) resulted in the compromise of the confidential data of suppliers, customers, and around 130 employees located in Costa Rica.
  • A cyber-attack disrupted US cyber insurance firm CNA Financial Corp.’s (CNA) customer and employee services for three days with the company forced to shut down to prevent further compromise.
  • London-based Harris Federation suffered a ransomware attack and was forced to “temporarily” disable the devices and email systems of all the 50 secondary and primary academies that it manages.
  • Australian broadcaster Channel Nine was attacked, leaving the company unable to air its Sunday news bulletin and several other shows.
  • A ransomware attack against the internal IT systems at IoT device manufacturer Sierra Wireless (SWIR) led to the company halting production at its manufacturing sites.
  • Cybercriminals engineered an attack on a Florida water treatment facility seeking to poison the plant’s water supply by increasing the amount of sodium hydroxide to a potentially dangerous level.

And while those and other high-profile attacks garner media attention, 30,000 websites were hacked per day in 2020 and every 39 seconds there is a new attack somewhere on the web.[4] To combat the “growing cyber challenge” as the scale of the problem “continues to both change and grow,” businesses are allocating more resources, including a 39% increase in cybersecurity spending.[5] That increase is leading to favorable year-over-year revenue and earnings metrics that have already reported their March quarter results and is poised to do the same at those that have yet to do so.

March quarter earnings

According to Zacks, during April, more than 1,500 companies reported their quarterly results and among there were several favorable reports from index constituents. Several key themes were had including:

  • Revenue and EPS for the March quarter came in ahead of consensus expectations;
  • Upward revisions were had to financial guidance;
  • Warnings that the number of attacks continue to grow even as bad actors continue to innovate new attack strategies.

Check Point Technologies (CHKP) reported a March quarter beat with revenue up 5% year-over-year to $508 million, while EPS for the quarter rose 9% to $1.54. Deferred revenue for the quarter climbed 8% compared to the March 2020 quarter, reaching $1.458 billion.

Per the company: “As hackers continue to find new ways to exploit the pandemic’s disruption, Check Point Research warned organizations about a global surge in ransomware attacks, alongside increases in cyber-attacks targeting Microsoft Exchange Server vulnerabilities. This uptick included a 57% increase in organizations affected by ransomware during a 6-month period.”

March quarter results at F5 Networks (FFIV) topped expectations with revenue for the quarter up 10% year over year to $645 million. According to the company, it is seeing stronger than anticipated demand across the board as “Business and consumers increasing reliance on applications has accelerated all prior expectations about the pace of digital transformation… customers across the globe are scaling their digital assets faster, resulting in a growing demand for F5’s application security and delivery solutions.”

During the quarter, F5’s transition to a subscription-based model continued with record subscription volume leading subscriptions to account for 79% of its software revenue in the quarter vs. 73% in the year-ago period. Meanwhile, Systems revenue rose 17% year-over-year due to increases in “application traffic, the continued growth of systems-based security use cases as well as the emergence of 5G-driven service provider demand.”

When it reported its March quarter results, FireEye (FEYE) bested consensus expectations with $246.3 million in revenue, a 10% increase vs. the year-ago period, and boosted its 2021 guidance to $1.01-$1.03 billion vs. $941 million in 2020 and $889 million in 2019. During the quarter, the company’s annual recurring revenue climbed 9% to $643 million. Leading that charge was the company’s platform cloud subscription, managed services professional services that amounted to 69% of total billings in the quarter, up from 56% a year ago.

The March quarter also showed FireEye making progress on bagging larger deals as the number of products per customer continued to grow. During the quarter, the company closed 30 transactions greater than $1 million and more than 70% of those transactions included three or more products or solutions, and 60% included consulting services.

On the company’s earnings conference call, it shared its findings that “actors continue to innovate faster than the technologies customers are deploying to protect their networks and organizations are deploying to protect their networks. The attackers are learning new ways to circumvent conventional safeguards that cannot or do not learn from the frontlines in a timely manner.”

Later on in the call, FireEye added the following: “Nearly half of the 294 distinct malware families we observed in investigations last year were new and never seen before. More than 80% of these new malware families were not publicly available, meaning they were privately developed, and availability was restricted in some way. And 70% of all the malware families we observed were only found in a single intrusion set.”

Fortinet (FTNT) reported March quarter revenue that climbed 23.1% compared to the year-ago quarter reaching $710.3 million, nicely ahead of the consensus forecast. EPS for the quarter cruised past consensus expectations as well hitting $0.81 per share. Billings for the quarter jumped 27% year over year to $850.6 million while total deferred revenue exiting the quarter rose roughly 25% to $2.75 billion.

Cloud security solutions were a driving force in the company’s Service revenue, growing to $460 million during the quarter. Support and professional services revenue increased 21% to $210 million, while Fortinet’s subscription revenue grew 21% year-over-year and low-single-digit quarter-over-quarter gains to $255 million. For the current quarter, the company sees revenue of $733-$747 million, up 19%-21% year over year, and ahead of the $732 million consensus.

Upcoming constituent earnings reports

As the pace of quarterly earnings accelerates further in the coming weeks, with roughly 2,540 such reports to be had in May vs. 1,507 in April, a greater number of index constituents are slated to issue their latest quarterly results:

  • Tuesday, May 4: Commvault (CVLT), McAfee (MCFE)
  • Wednesday, May 5: CyberArk (CYBR), Radware (RDWR), Ping Identity (PING)
  • Thursday, May 6: NetScout Systems (NTCT), Cloudflare (NET)
  • Monday, May 10: Norton Lifelock (NLOK), SailPoint (SAIL)
  • Tuesday, May 11: Mimecast (MIME)
  • Thursday, May 13: Nice Ltd. (NICE), Tufin Software (TUFN)
  • Wednesday, May 19: Cisco Systems (CSCO)
  • Thursday, May 20: Palo Alto Networks (PANW), Splunk (SPLK)
  • Thursday, May 27: Okta (OKTA), Zscaler (ZS)

When we held the last webinar at the end of March, before the current earnings season got underway, we commented that the constituents of the Cybersecurity and Digital Privacy Index were poised to grow their aggregate revenue and EPS by more than 20% over the 2020-2022 period. As we tally the upcoming earnings reports, we’ll have a much better sense for the degree to which 2021 cybersecurity industry spending forecasts calling for year over year growth of 10% are conservative and how translates into even faster revenue and earnings growth for the basket of constituents. We continue to see consensus expectations for that basket moving higher over the coming quarters as the increasingly pervasive nature of attacks is once again realized while the combination of new technologies, new business models, and sadly new types of attacks expands the addressable market even further.

==============================================================

[1] “Firms are Spending More on Cybersecurity To Combat Growing Threats” available at https://digit.fyi/firms-are-spending-more-on-cybersecurity-to-combat-growing-threats/

[2] IBID

[3] “10 Major Cyber Attacks Witnessed Globally in Q1 2021” available at https://securityboulevard.com/2021/04/10-major-cyber-attacks-witnessed-globally-in-q1-2021/

[4] “How Many Cyber Attacks Happen Per Day in 2020?” available at https://techjury.net/blog/how-many-cyber-attacks-per-day/

[5] “Firms are Spending More on Cybersecurity To Combat Growing Threats” available at https://digit.fyi/firms-are-spending-more-on-cybersecurity-to-combat-growing-threats/

Thematic Reads: April 26, 2021

Thematic Reads: April 26, 2021

Thematic Reads

Each week Team Tematica consumes an immense quantity and range of content as we look to stay on top of the latest data and mine it for tailwind and headwind signals for our investment themes and indices.

Cleaner Living
Growing demand for items that claim to be better for you and the planet:

 Volvo AB (VOLVF), the world’s second-largest truck-maker, is looking to generate half of its sales in Europe from electric vehicles by 2030. The company recently announced three new heavy-duty electric trucks designed for intercity regional transport and urban construction. Production of the trucks is expected to start in the latter half of 2022.

Toyota Motor (TM) introduced the Toyota bZ4X Concept, the first of a global series of battery-electric vehiclesto be launched under the “Toyota bZ” brand umbrella.

German automotive company Daimler (DDAIF) shared it will create 1,000 new jobs for software programmers at its S-Class production facility to develop its planned operating system for electric vehicles. Daimler’s MBOS system, which will run electric-only vehicles, is expected to hit the market in 2024.

The Oprah Winfrey-backed oat-milk maker Oatly Group AB (OTLY) has filed to go public in the US and intends to raise at least $100 million.

Nestlé SA (NSRGY) is in talks to buy the maker of Nature’s Bounty vitamins for a price in the mid-single-digit billions, according to people familiar with the matter, as the Swiss food giant pushes further into nutritional offerings… In addition to Nature’s Bounty vitamins, Bountiful’s brands include Pure Protein, which makes protein bars, Osteo Bi-Flex joint-care supplements and Puritan’s Pride vitamins and supplements.
Nestlé Looks to Buy Maker of Nature’s Bounty Vitamins


Cyber Security & Data Privacy

Securing individuals and organizations against cyber threats and privacy violations:

The Biden administration is buckling down on cyber threats to the U.S. power infrastructure. The Department of Energy (DOE) announced a 100-day plan to help shore up the U.S. electric power system against cyber threats. The plan, rolled out with the private sector and the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA), is meant to help owners and operators develop more comprehensive approaches to detection, mitigation and forensic capabilities, according to the National Security Council.
Biden administration unveils plan to defend electric sector from cyberattacks

An ongoing phishing campaign is impersonating Michael Page consultants to push Ursnif data-stealing malware capable of harvesting credentials and sensitive data from infected computers.
Phishing impersonates global recruitment firm to push malware

Costco Wholesale (COST) warned American internet users to be wary of more than a dozen digital scams targeting its customer base. On its website, the American multinational corporation has published screenshots of 14 “prominent fraudulent emails, texts, and posts” in which cyber-criminals are impersonating Costco.
Costco Issues Scam Warning

Check Point reported March quarter results that topped top and bottom-line expectations. Exiting the quarter, deferred revenues were $1.46 billion, up 8% YoY. Per the company, “The cyber threat landscape is reaching new levels of risk and requires a holistic security architecture to prevent the next cyber pandemic.”
Checkpoint Software (CHKP), April 26, 2021


Digital Infrastructure & Connectivity

The Buildout and upgrading of our Networks, Data Storage Facilities, and Equipment:

“Several factors are at play in driving this robust wafer front end growth. First, secular tailwinds such as AI, 5G, and IoT continue to strengthen. And over the past year, COVID-19-related impacts like work and learn from home have accelerated adoption of these technologies.”
Lam Research (LRCX), April 21, 2021

“Compared to three months ago, we are seeing a significant increase in demand across all market segments and our product portfolio. The build-up of the digital infrastructure with secular growth drivers such as 5G, AI and High- Performance Computing solutions fuels demand for advanced and mature nodes in Logic as well as Memory. We now expect revenue growth towards 30% in 2021 compared to last year.”
ASML Holding (ASML), April 21, 2021

“In data center, we believe revenue bottomed in Q1 and will increase in Q2 as cloud digestion impacts begin to subside, and enterprise and government momentum continues.”
Intel (INTC), April 23, 2021

“We have partnered with leading brands across diverse verticals, such as Honda to innovate connected and autonomous driving; Deloitte and SAP to create a 5G and edge computing retail digital platform that will provide retailers with real-time operations data; and Dreamscape and Arizona State University to build and commercialize immersive learning and training.”
Verizon (VZ), April 21, 2021

“…the latest slew of UK government broadband funding, which has largely been based on clear and unambiguous objectives: providing gigabit-speed connections to 85 per cent of the country by 2025, be that through FTTP or 5G, or any other sufficiently-capable technology.”
Maybe high-speed internet is infrastructure after all, say US Republicans in proposal to spend $65bn over five years


Digital Lifestyle

The increasingly digital landscape that now underpins the entire consumer experience:

Walt Disney (DIS) and Sony’s (SNE) Sony Pictures Entertainment announced a multi-year content licensing agreement for US streaming and TV rights to Sony Pictures’ new theatrical releases across Disney+ and Hulu, as well as ABC, Disney Channels, Freeform, FX and National Geographic.

Digital Payments & FinTech
Companies leveraging technology to disrupt and improve the financial services and payments industries:

PayPal (PYPL) announced the launch of crypto on Venmo, a new way for Venmo’s more than 70 million customers to buy, hold and sell cryptocurrency directly within the Venmo app.

Amazon (AMZN) is expanding Amazon One, its palm-scanning payment system to a Whole Foods store in Seattle, the first of many planned rollouts at other locations.

Juniper’s Digital Money Transfer & Remittances whitepaper says mobile transactions will represent an 89 per cent per cent share of total transaction value by 2025. The report also found that with shifting customer expectations, existing money transfer models face an increasing threat from instant payments, with domestic instant payment transaction values forecast to grow from $524billion in 2020, to $2trillion in 2025.
Mobile Transactions Will See Digital Money Transfers Soar to $3.4 trillion


Thematic Dividend All-Star
Combining the power of rising dividends and thematics.

 “The historical evidence strongly suggests that expected future earnings growth is fastest when current payout ratios are high and slowest when payout ratios are low.”
Does Dividend Policy Foretell Earnings Growth?


Sustainable Future of Food
Companies addressing the challenge of providing healthy, affordable and nutritious food to a growing global population amid dwindling natural resources.

Trimble (TRMB) and HORSCH announced a collaboration focused on developing solutions that enable autonomy in agriculture with the goal of building a future for autonomous machines and workflows in the industry.

Raven Industries (RAVN) purchased all of the intellectual property and patents of Jaybridge Robotics, an early developer of automated agriculture technology. Raven will leverage the portfolio with its continued development of Driverless Ag Technology — including integration of the technology into the company’s AutoCart platform.

Bear Flag Robotics tractors provide growers increased command and control to take control of any situation in the field, higher levels of safety for farmers and the machines and path generation technology to give operators total control
Bear Flag Robotics Autonomous Tractor

Tematica Research Indices

 

Tematica investment themes front and center in Super Bowl 2021 Ads

Tematica investment themes front and center in Super Bowl 2021 Ads

One of the wonderful things about thematic investing when it is done right, is the number of recognizable and relatable points of confirmation to be had once an investor has fine-tuned their focus, or as we at Tematica like to say, strapped on your thematic lens. The traditional investor analyzes and assess a variety of data points ranging from monthly and quarterly economic data to survey findings and third-party research reports as well as industry and company specific news and events. We at Tematica do all that as well, given our fundamental and global macro upbringing, but we also look for other confirming data points such as new product introductions, M&A activity as company’s look to reposition their offerings, new partnerships and the like. This has us being those pesky people that slowly walk the aisles of store, be it grocery or other, looking for the new, new thing while also noting how much of the floor and shelf space has been usurped by products that fit hand in glove with our investment themes. That’s pretty much week in week out for the Tematica team but from time to time there is a confirmation blitz, and it so happens the 2021 Super Bowl was just such an event.

While the 2021 Super Bowl may have been a meh event to many, it was still the most watched television event so far this year and was likely at least on par with the 100 million people in the US that have watched each Super Bowl over the last decade. On a global basis, total viewership is estimated to be another 30-50 million more. The sheer magnitude of eye-balls being captured during the game means it’s a big-ticket item for a company to reach all those viewers, roughly $5.5 million in 2021 for a 30-second spot. In today’s digitally connected world, that increasingly favors ad placement with focused online content, it means the Super Bowl is one of the last bastions of major mass marketing in which advertisers can reshape their brand awareness, oftentimes looking to become a household name. And that doesn’t factor in the additional views to be had on YouTube and other video platforms, given the penchant to discuss them as part of pop culture and the latest zeitgeist.

From our perspective, it means companies are looking to use this event to reach viewers they may not normally speak to and reveal to them, sometimes in a subtle way, how they are tilting their businesses into the thematic tailwinds that are unfolding before our very eyes. For Tematica, this year’s Super Bowl ads were a cornucopia of confirming data signals for many of our themes. Here are some examples:

Cleaner Living

Digital Infrastructure & Connectivity

Digital Lifestyle

Unlike many thematic strategists Tematica doesn’t just look for themes that “could be happening if” or the companies that are “skating to where the puck will be.” We focus on the themes arise from structural changes in behavior and spending and the companies whose business models allow them to prosper. And yes, we recognize that neither Verizon (VZ) nor T-Mobile (TMUS) are in our Digital Infrastructure & Connectivity Index, but the focus of their commercials on 5G speak to the one of the key drivers of that theme and index as well as as the corresponding ETF. The bottom line is this – the ad spending on Super Bowl LV while providing pivot points for some, re-enforced to us that our investment themes and indices are on track.

Disclosures

  • Chipotle Mexican Grille (CMG) is a constituent in Tematica Research’s Cleaner Living Index.
Thematics Make Outsized Returns in 2020

Thematics Make Outsized Returns in 2020

To say 2020 was a year unlike any other is an understatement on several fronts but despite all of it, equities finished the year higher and once again the major indices were bested by several of Tematica Research’s thematic indices. That includes several of them topping the outsized (but fairly narrowly driven) 43.6% return for 2020 registered by the Nasdaq Composite Index.

Investing between February 19th and March 23rd was a clear example of “catching a falling knife” as the uncertainty of the impact of an unfolding global pandemic set in. While that uncertainty lingered well into the 2nd quarter, some trends started to emerge that forced changes in both consumer behavior and company business models. Going into the 3rd quarter, equities recovered as economic data and earnings were somewhere between better than expected and not as bad a feared. There were some setbacks in September and October as Covid case counts surged, but stocks were once again surging in early November due to a fresh shot of hopium following positive vaccine developments and the conclusion of the presidential election. 

The bulk of the 2020 gains for the Dow Jones Industrial Average and the S&P 500 came during the fourth quarter, despite the year-end haggling over the pandemic relief bill. The same was true with the small-cap heavy Russell 2000, which climbed 31% in the fourth quarter, outpacing the other major market barometers and enabled its positive return for all of 2020. By comparison, the Nasdaq Composite Index, which closed up more than 40% in 2020, benefited from a number of factors, including the pandemic inspired accelerated shift to digital shopping, work from home and learn from home. That pull-forward in both data consumption and data creation fueled incremental network capacity additions and set up the launch of 5G networks and devices in the second half of the year. The same shift, however, led to a year over year uptick in cyberattacks culminating with the Solar Winds attacks that compromised not just federal institutions and large companies, but also platforms of Microsoft (MSFT) and FireEye (FEYE). Those catalysts in particular led to the strong December quarter showing for Tematica’s Digital Infrastructure & Connectivity and Cybersecurity & Data Privacy investing themes.

What’s to come in 2021?

It’s great to enjoy the wins, but as we all know, the stock market is a forward-looking animal and that means not taking too much time to pat ourselves on the back, but rather preparing for what lies ahead. Even as the COVID-19 vaccine is being administered, it will take months before vaccines are readily available to all who need them. Then, and only then will many politicians feel comfortable fully reopening their economies. On January 4, for example, UK Prime Minister Boris Johnson just ordered a third national lockdown to be in place through mid-February. Yes, there is a light at the end of the tunnel, but we continue to see some economic speed bumps to be had — at least at the outset of the March quarter. 

In the coming weeks, President-elect Joe Biden will be sworn into office, and despite the lawsuits, promises of legislative (and other) disruptions, the machinery of government continues to move forward. Perhaps Capitol Hill will hammer out an infrastructure spending bill that will finally address the nation’s crumbling roads, bridges, ports, airports and highways. The ongoing trade issues with China will also need to be addressed, as well as President Biden’s own agenda items.

Before Biden takes the Oval Office, two known items that we’ll contend with are the CES 2021 tech conference and the start of the December-quarter earnings season. Much like other conferences and trade shows held during the pandemic, CES will be a virtual-only event for the first time in its history. It will still feature a number of keynotes that will prognosticate on what we are likely to expect in the coming year on the technology front and “virtual” vendor booths.  

In recent weeks we’ve seen GDP expectations for the start of 2021 drift lower as the pandemic has once again presented a headwind to the economy and efforts to contain it have expanded. We’re also learning of a new strain of Covid-19 that “spreads more efficiently” but “does not seem to evade the protection that’s afforded by vaccines that are currently being used,” according to Dr. Anthony Fauci. At the same time, the distribution of vaccines in the U.S. has gotten off to a slower-than-expected start. Expectations are that vaccine activity will increase in the coming weeks and we’ll be sure to keep tabs on vaccine-related data published on the CDC COVID Data Tracker website. As the number inoculated rises in the coming months, the closer we will be to the economy returning to normal. 

The issue is it will take some time to walk down this path, which to suggests things won’t begin to normalize until the second half of 2021. We also continue to think consensus expectations run the risk of an economic and earnings speed bump in 2021. Supporting that view is the retreat in the Citibank Economic Surprise Index in recent months, and also the slowing growth reported in the IHS Markit December Flash U.S. Composite PMI data. Part of that was due to the fall in new export sales, as renewed lockdowns in key export markets dampened foreign demand.

All of this is summed up rather well by Chris Williamson, Chief Business Economist at IHS Markit who said, “… December has seen companies rein in their expectations, given the higher virus case numbers and tougher lockdown stances adopted in some states. Lockdowns in other countries were meanwhile reported to have hit exports. While vaccine developments mean some of the clouds caused by the pandemic should lift as we head through 2021, rising case numbers continue to darken the near-term outlook.” 

Normally, there tends to be some step down in economic activity from the December quarter to the March one, as consumer spending wanes in comparison to the year-end holiday shopping season. The start of 2021 is expected to see a somewhat larger step down in GDP — to 1.9% during the March quarter vs. the expected 4.1% in the December 2020 quarter, according to data published by The Wall Street Journal’s Economic Forecasting Survey. That same survey goes on to forecast GDP of 3.7% for all of 2021, which means its expectation for the other three quarters of 2021 hover around 4.0%. 

While recent COVID-19 new cases have waned some in aggregate across the U.S., hot spots remain — and that has prompted the extension of virus-fighting measures even as a new strain of the virus that spreads quicker has been found inside the U.S. Similar to what we saw after Thanksgiving, odds are we will see a post-holiday rise in new case counts in early January. Should this come to pass, in all likelihood it will mean more restrictions that will be a headwind to the economy and corporate earnings.

Earnings expectations ahead

On the December-quarter earnings front, data from FactSet shows that so far in the quarter, more S&P 500 companies issued positive earnings guidance than average. More than 80 companies in the index have issued EPS guidance for the December quarter so far and of them, roughly 30 issued negative EPS guidance and more than 55 issued positive EPS guidance. That puts the percentage of companies issuing positive EPS guidance at more than 65%, well above the five-year average of 33%. This sounds positive, but keep in mind that the total number of companies issuing guidance remains well below the five- year average for the quarter and consensus expectation for December quarter EPS is still a year-over-year decline of around 10%.

Digging into the data, we see the S&P sectors that are driving that year-over-year decline for the December quarter.

But again, the stock market is a forward-looking animal, and current expectations call for a 22.7% rebound in S&P 500 EPS during 2021 vs. 2020, as well as a 4.1% increase compared to 2019.

Circling back to the Tematica Research indices that we shared at the outset, their EPS prospects over the 2019-2021 period are multiples greater than for the S&P 500. We attribute this to the pronounced tailwinds that are powering both each of those themes as well as the revenue, EPS and cash flow of the aggregated constituents. One rule of thumb on Wall Street is that faster EPS growth tends to spur multiple expansion, which is a pretty powerful one-two combination for stock prices and index constituents. Reflecting on the below data, it looks like 2021 will be another year of outperformance for several Tematica Research themes and indices.

California voters approved California Privacy Rights and Enforcement Act. Now what?

California voters approved California Privacy Rights and Enforcement Act. Now what?

On November 3, California citizens approved the California Privacy Rights and Enforcement Act (CPRA), a comprehensive privacy law that expands the California Consumer Privacy Act (CCPA). Of note, the CPRA creates more stringent requirements for companies that collect and share sensitive personal information and creates the California Privacy Protection Agency, which will be responsible for enforcing CPRA violations once the CPRA becomes effective on January 1, 2023. Most privacy experts believe the CPRA moves California closer to the European Union’s General Data Protection Regulation (GDPR).

The CPRA defines “sensitive personal information” as a wide range of data points that includes things like account and login information, precise geolocation data, contents of mail, email and text messages, genetic data, Social Security numbers, drivers licenses, passports, financial accounts, race, ethnicity, religion, union membership, personal communications, genetic and biometric data, health information, and anything about sex life or sexual orientation.

CPRA sets limits on the collection and retention of personal information, requiring a business to retain only that which is reasonably necessary to achieve the purposes for which the personal information was collected or processed. In addition, the CPRA requires businesses to inform consumers of the length of time the business intends to retain each category of personal information and sensitive personal information, or the criteria used to determine that period.

The CPRA also expands the private right of action for consumers to bring claims against a business for the unauthorized access or disclosure of an email address and password or security question that would permit access to an account, along with access to a consumer’s non-encrypted and non-redacted personal information. It creates triple damages for violations relating to consumers who are minors under the age of 16.

One key change in the CCPA requirements in the CPRA is an extension of an exemption for businesses in terms of their employees’ data. The CPRA gives businesses the exemption from meeting the consumer privacy requirements’ tough standards for their employees until January 1, 2023. However, businesses will have to comply with certain aspects of employee privacy protection between now and then.

Source: California voters approved a new and even tougher data privacy act.  What happens now?

US telemedicine users to surpass 40 million in 2020, 60 million by 2023

US telemedicine users to surpass 40 million in 2020, 60 million by 2023

The coronavirus pandemic is radically altering how people go about their daily lives, and that includes how they interact with their healthcare providers. With quicker data speeds brought on by 5G, WiFi 6 and other broadband technologies that also feature lower latency, the telemedicine experience will continue to improve, chewing up network capacity along the way. Needless to say, we see this as a positive driver for the Tematica BITA Digital Infrastructure & Connectivity Index. 

 

 

This year, 41.7 million adults in the US will use telemedicine, representing 98.8% growth from a year prior, according to our latest estimates.We expect this behavior to stick and for growth to continue through the end of our forecast period in 2023, when the number of users will be more than triple that of 2019. By the end of 2023, there will be 64.0 million telemedicine users.

Data from CivicScience published in July also signals a change in telemedicine adoption. For example, in January, just 11% of US adults said they had used telemedicine. That figure more than tripled by July. During that same time period, the percentage of respondents who reported having no plans to use telemedicine—or simply no awareness of it—decreased by 25 percentage points.

Source: US telemedicine users will surpass 40 million this year – Insider Intelligence Trends, Forecasts & Statistics

Cloudflare and Apple design a new privacy-friendly internet protocol

Cloudflare and Apple design a new privacy-friendly internet protocol

Engineers at Cloudflare (NET) and Apple (AAPL) say they’ve developed a new internet protocol that will shore up against “one of the biggest holes in internet privacy.” Dubbed Oblivious DNS-over-HTTPS (ODoH), as Nick Sullivan, Cloudflare’s head of research explains, it is meant to “separate the information about who is making the query and what the query is.”

Every time you go to visit a website, your browser uses a DNS resolver to convert web addresses to machine-readable IP addresses to locate where a web page is located on the internet. But this process is not encrypted, meaning that every time you load a website the DNS query is sent in the clear. That means the DNS resolver — which might be your internet provider unless you’ve changed it — knows which websites you visit. That’s not great for your privacy, especially since your internet provider can also sell your browsing history to advertisers.

Enter ODoH, which decouples DNS queries from the internet user, preventing the DNS resolver from knowing which sites you visit.

ODoH wraps a layer of encryption around the DNS query and passes it through a proxy server, which acts as a go-between the internet user and the website they want to visit. Because the DNS query is encrypted, the proxy can’t see what’s inside, but acts as a shield to prevent the DNS resolver from seeing who sent the query to begin with.

Cloudflare (NET) is a constituent in the Foxberry Tematica Research Cybersecurity & Data Privacy Index.

 

Source: Cloudflare and Apple design a new privacy-friendly internet protocol | TechCrunch

UK lawmakers plan bill to target Huawei

UK lawmakers plan bill to target Huawei

In a move to appease hawks pushing for tighter restrictions on Huawei Technologies, the UK is considering a ban on the installation of 5G equipment from Huawei as soon as next year, well before a blanket ban in 2027. UK lawmakers are set to debate the bill next week, and should it come to pass it would be a shot in the arm for Ericsson (ERIC), Nokia (NOK) and other company’s in the Tematica BITA Digital Infrastructure and Connectivity Index

Any further installations of Huawei equipment by carriers would carry fines of as much as 10% of sales or 100,000 pounds a day ($133,000).

The government already set limits on telecom companies including BT Group Plc, Vodafone Group Plc and CK Hutchison Holdings Ltd.’s Three UK buying gear from Huawei that are set to kick in after December. However, there are no rules yet barring the companies from using Huawei equipment they already bought but haven’t yet installed.

Under the new proposal, that ban could come into force as soon as September next year, the people said, asking for anonymity as the talks are confidential.

The latest proposals may not go far enough for some lawmakers, who are calling for the government to consider forcing carriers to remove Huawei equipment from their 5G networks earlier than the current 2027 plan.

Source: U.K. Looks at Huawei Install Ban Next Year to Placate Hawks – Bloomberg