In today’s challenged markets, consider cybersecurity stocks. Why? We could be entering a global recession. But that doesn’t mean hackers will soon be out of work. Corporate America remains vulnerable to data breaches. As Robert Siegel, lecturer in management at Stanford Graduate School of Business, wrote in an email to InvestorPlace, “Perhaps the most obvious challenge will be in privacy and safety due to increased connectivity.”
Why? Even before millions of Americans were working from home due to the coronavirus from China, decentralized workplaces were becoming the norm. Large-scale moves to cloud computing also add to increased demand. This means sensitive data is under greater threat from bad actors. Overall, corporate America needs cybersecurity now more than ever.
With these tailwinds in motion, now’s the time to look into cybersecurity stocks. But which ones are the best stocks to invest in? Taking a look at large cap names, a few stand out. Granted, short-term headwinds may impact performance. But all three could be great long-term buys for your portfolio.
Let’s dive in, and see why you should keep these three cybersecurity stocks on your radar.
Cybersecurity Stocks To Buy: Check Point Software (CHKP)
Check Point Software (NASDAQ:CHKP) stock may face slow growth. But what this Israeli-based company makes up for it with is a solid balance sheet. As one writer recently noted, Check Point’s zero debt and strong cash flow may make it a safe harbor in these challenging times.
Additionally, with shares trading at a forward price-to-earnings (P/E) ratio of 15.6, this is a value stock in a growth industry. Granted, forward revenue growth is only 3.3%. Yet, the company could use its financial strength to capitalize on the situation. How? By acquiring faster-growing cybersecurity businesses while valuations remain depressed.
However, don’t discount the value of Check Point’s existing operations. As InvestorPlace’s Josh Enomoto discussed last fall, a key area for the company is ransomware protection. As Enomoto put it, the company shows strength in “addressing next-generation threats.”
Slow-growth may make them more vulnerable to high-flying competitors. But, shares could already reflect this factor. So with recent price declines, CHKP stock may be one of many stocks to invest in as markets head towards a bottom. Be careful before “buying the dip,” but keep this name on your radar.
Fortinet (NASDAQ:FTNT) stock is another strong cybersecurity play. But, is the company immune to economic headwinds? No, says D.A. Davidson’s Andrew Nowinski. The analyst recently downgraded shares from “buy” to “neutral.”
The reason? Fortinet’s focus on firewalls may mean its products and services could be in less demand. In other words, don’t expect businesses to upgrade their firewalls anytime soon. This could impact the company’s high projected revenue growth of around 15% between 2020 and 2021.
Coupled with the stock’s high valuation (forward P/E of 38.2), it may pay to wait-and-see with FTNT stock. In other words, the company’s underlying business may be well-positioned. But this factor could remain priced into shares.
Bottom line? With the stock down from $120 per share to under $100 per share, FTNT stock may be a buy today. But at even lower prices, Fortinet shares could be a strong opportunity.
Corporate America’s move the cloud is a boon for Okta (NASDAQ:OKTA) stock. Remote working also benefits this fast-growing identity company. But these tailwinds may not be enough to sustain growth. MFA (multi-factor authorization) and single sign-on isn’t going away. But, a recession could affect the company’s current 40%-plus revenue growth.
As I discussed back in October, Okta’s valuation is priced-in projected growth, and then some. Yet, the stock rallied further in the now-past bull market. Shares have retreated back to being near prior levels in recent weeks (between $110 and $120 per share). However, keep in mind downside risks before putting in a buy order.
Okta’s underlying catalysts remain strong, but shares could easily head back to their 52-week low (around $79 per share) if the company’s high growth takes a dip.
My call? Consider shares today, but keep in mind how COVID-19 affects first quarter (Q1) 2020 results. The company posted stellar numbers for fourth quarter (Q4) 2019. But, with the economy turning on a dime, all bets are off.
Thomas Niel, contributor to InvestorPlace, has written single-stock analysis for web-based publications since 2016. As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities.