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Stock Analyst Update

Mandiant Purchase Ups Google's Cybersecurity Offerings

This acquisition helps Google compete more effectively with Amazon and Microsoft.

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Alphabet’s Google (GOOG) announced that it will purchase no-moat cybersecurity firm Mandiant for $5.4 billion in cash, or $23 per share, above Morningstar’s $17 fair value estimate. This acquisition likely will move Google Cloud’s cybersecurity offerings further toward a one-stop shop and help Google compete more effectively with Amazon and Microsoft, which was also interested in acquiring Mandiant, according to Bloomberg. We do not expect this acquisition to significantly affect our Google Cloud revenue projections nor our fair value estimate for Alphabet, which remains at $3,600 per share.

We estimate the deal price represents 7.5 times and 6 times Mandiant revenue this year and in 2023, respectively. Morningstar’s latest Mandiant revenue estimates include 16.6% growth this year to $564 million and a 19% five-year compound annual growth rate through 2026 to nearly $1.2 billion, which we think could represent around a 2% increase in Google Cloud revenue versus our stand-alone estimate.

The acquisition, which should close later this year, will add Mandiant’s cloud-based software-as-a-service automated defense, threat intelligence, security validation, and attack surface minimization offerings, along with consulting services to Google Cloud. Google said it will also utilize Mandiant’s offerings for clients with on-premises environments. The main risk associated with this deal is increasing scrutiny from regulators and antitrust agencies.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.