Equifax (EFX) Tanks As Reports Claim Another Cyber Attack

Shares of Equifax Inc. (NYSE:EFX) fell yesterday after the website — Ars Technica — reported that the credit information provider may have been subject to another cyber attack. Per Ars Technica, Randy Abrams, an independent security analyst, discovered that the company’s web site is prompting to install Adobe’s (NASDAQ:ADBE) Flash updates which has been found containing malware.

Following the above discussed report, the company’s shares were seen tumbling around 3% during mid-day on Thursday. However, later in the day, the stock recovered almost half of the loss, after Equifax announced that it is not subject to any another cyber attack and its systems have not been compromised.

Equifax’s spokesmen Wyatt Jefferies said that the company was “aware of the situation identified on the Equifax.com Web site in the credit-report assistance link.” He further added, "Our IT and security teams are looking into this matter, and out of an abundance of caution have temporarily taken this page offline."

The company in a statement noted that, “The issue involves a third-party vendor that Equifax uses to collect website performance data, and that vendor’s code running on an Equifax website was serving malicious content.” Equifax further stated that the vendor’s code has been removed from its webpage and it is conducting further analysis on this matter.

Notably, the brand image and creditability of Equifax has already been in question ever since the company announced last month that very sensitive personal data of approximately 143 million consumers has been stolen from its database.

Since then, Equifax has been facing huge customer criticism, while cybersecurity companies are questioning its preparedness and response to this massive data breach. Moreover, with lawmakers and investigating agencies probing the mishap, its troubles are unlikely to end any time soon.

Shares of Equifax have lost approximately 24% of its value from the Sep 7 closing price. In the year-to-date period, the company has lost 8%, significantly underperforming the industry to which it belongs to, which has recorded growth of 31.7%.

Investors seem concerned that the entire issue may result in loss of customers and the company may also have to make huge compensation to its clients. It is feared that this will have an adverse impact on the company’s financial performance in the near term.

Sensitivity of the information exposed in Equifax’s data breach case makes it one of the worst cases in recent times. The latest data breach at the company will likely have a lasting impact as criminals can use the stolen resources for opening new accounts, applying for credit cards or loans, buying insurance, renting an apartment or even for tax frauds.

It should be noted that banks and financial institutions rely on the United States’ three main consumer credit reporting agencies — Equifax, TransUnion (NYSE:TRU) and Experian. Therefore, with access to social security, driver’s license and credit card numbers, criminals can make such frauds due to which consumers will have to suffer for longer periods of time.

Hence, we believe investors’ concerns are justified as the mishap will have a lasting impact on Equifax’s results, in the form of financial costs relating to settlement of lawsuits and litigation expenses. Moreover, it will be very tough for the company to repair its brand image, as well as retain the current customer base.

Currently, Equifax carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the same industry is Fidelity National Information Services, Inc. (NYSE:FIS) which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The stock has a long-term expected EPS growth rate of 12%.

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