We live in a digital world, to borrow from the famous Madonna’s song “Material Girl.” You know the song lyrics that said “Cause we are living in a material world and I am a material girl?” We are a technology-savvy society today, as technology and digital applications are found almost everywhere. So what does this have to do with cybersecurity stocks?
Technology has to do not just with material things such as business applications, our modern cars, wealth and investment decisions, but also non-material things such as research and development, and think-tank networks. And information technology systems by various companies are kept online on the cloud.
So, cyberattacks can cause massive disruptions, causing huge problems. That’s why secure, reliable, reputable and stress-free cybersecurity is highly in demand on a global basis. Cybersecurity stocks can profit from this need.
What are the hot areas? Well, the Institute of Chartered Accountants in England and Wales has identified the following top five cyber threats in one of its reports:
- Data leakage
- Insider threat
In addition, Quince Market Insights posted a report about the global cybersecurity market and its expected growth. According to the report “The global cybersecurity market size was estimated to be USD 162.5 billion in 2020 and is projected to register a CAGR of 12.5% to reach USD 418.3 billion by 2028. the North America market is poised to capture a larger share in the global market for cybersecurity.”
Luckily for us, the following five cybersecurity stocks can offer advanced solutions to securing our sensitive personal and business data online.
Cybersecurity Stocks: CrowdStrike (CRWD)
A key catalyst for buying a stock is the earnings report, especially if the company records a beat on the estimates. CrowdStrike, with a market capitalization of $44 billion, is among the largest players providing cybersecurity globally.
On March 16, 2021, the company reported better-than-expected fourth-quarter results, with fourth-quarter revenues of $264.9 million, an increase of 74% year-over-year — much better than the consensus estimate of $250.6 million. The Q4 non-GAAP earnings of 13 cents per share, was also a beat as analysts expected earnings of 8 cents per share. Compared to last year’s quarter’s loss of 2 cents per share the financial performance has been very positive.
The company’s CEO George Kurtz said, “CrowdStrike delivered a record fourth quarter and an exceptional finish to a strong fiscal year, achieving over $1 billion in ending ARR [Annual Run Rate]. The strong fourth quarter performance included record net new ARR of $143 million, 70% net new subscription customer growth year-over-year, and 77% year-over-year subscription revenue growth.”
Zacks estimates that CRWD stock could have an expected three-to-five-year EPS growth of 25%.
CACI International (CACI)
This company provides information solutions and services in North America and internationally. It also provides intelligence services and is serving the U.S. government among its clients. Other clients include both state and local governments, other commercial enterprises, and foreign government agencies.
Unlike CRWD stock, which is a growth stock that is relatively overvalued, CACI stock is a value stock and a profitable company. With a price-earnings ratio (TTM) of 16.8 CACI stock seems cheap. And the expected EPS growth of 10.5% for the next three-to-five years is not bad at all.
Want further positive news about the stock? Management decided to implement a share-repurchase program of $500 million. Caci’s CEO John Mengucci said, “This accelerated share repurchase transaction is the next step in a more opportunistic and flexible capital deployment strategy and demonstrates our confidence in CACI’s strategy and future growth prospects.”
A value stock with attractive growth prospects makes CACI a stock to monitor.
Fortinet provides worldwide broad, integrated, and automated cybersecurity solutions, and has several clients in diverse business sectors such as telecommunications, technology, financial services, retail, manufacturing, and healthcare industries. Also, it provides government-related business solutions to prevent cyberattacks or threats to private networks.
It is a large company with a market capitalization of $29 billion and is profitable. Its stock seems though pricey at first with a P/E ratio (TTM) of 58. But Fortinet is expected to have plenty of growth as Zacks estimates a three-to-five EPS growth of 14.3%.
The company on March 10 2021 announced, according to John Maddison, EVP of Products and CMO at Fortinet, that “Fortinet has been successful in enabling our channel partners to grow their business and services leveraging the Fortinet Security Fabric. Our partnerships go beyond the technologies that enable service offerings that drive growth and profitability. We’ve received outstanding feedback about the partner program to date and want to continue enhancing it to meet customers’ evolving needs as well as digital innovations. Today we are announcing updates that will help our partners to further reap benefits from the Engage Partner Program and to set themselves apart with customers.”
I like the sales growth of the company a lot. It has been steady at about 20% per year for 2018, 2019 and 2020. And EPS growth seems to be strong too. The focus on the strategic business plan by the management seems promising. The stock seems pricey so it would be better to wait for any selloff for the stock before investing in it.
On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.