The SolarWinds Hack was a wake-up call for private companies and the U.S. government concerning cybersecurity vulnerabilities. Such attacks are far from over, and reiterate the importance of having robust cyber defenses. As a result, the utility of cybersecurity stocks is constantly rising.
Digital breaches have been a major fixture in the tumultuous year that was 2020. There were 436 cyber-attacks on healthcare facilities alone last year, impacting 17.3 million people. Moreover, revised estimates suggest that the industry is expected to reach close to $200 billion by 2025. Therefore, cybersecurity stocks present one of the most lucrative investment options in the stock market today.
The developments last year have led to significant changes in top-level executives’ mindsets with regards to cybersecurity. According to a PWC survey, more than 50% of enterprise executives who responded plan to increase their company’s cybersecurity budgets in 2021. Moreover, the International Data Corporation (IDC) predicts that security services will be the fastest-growing segment in the security sector.
Therefore, with so much buzz around the sector, let’s look at seven industry juggernauts.
- Palo Alto Networks (NYSE:PANW)
- Crowdstrike Holdings (NASDAQ:CRWD)
- Zscaler Inc. (NASDAQ:ZS)
- Fortinet Inc. (NASDAQ:FTNT)
- DocuSign (NASDAQ:DOCU)
- Okta (NASDAQ:OKTA)
- Cisco Systems (NASDAQ:CSCO)
Cybersecurity Stocks: Palo Alto Networks (PANW)
Palo Alto Networks is one of the top cybersecurity platform solutions providers in the world. The company has done exceptionally well in scaling its business and expanding its ecosystem from its core security services to cloud and AI services. Additionally, PANW stock is one of the best performers in its peer group, growing by 90% in the past 12 months.
In the past year, the company has shifted its focus towards cloud services, which are stickier and easier to scale. It acquired companies in the networking, identity management, and cloud security realm in Zingbox, Aporeto, and Expanse in the past year. Moreover, it is investing heavily in its main security suite, Strata, and related services. Earnings growth has been in double digits and has comfortably surpassed analyst estimates in the past several quarters.
Crowdstrike Holdings (CRWD)
Cybersecurity specialist Crowdstrike Holdings has had a rollicking run at the stock market, as its shares shot up 232% in the past 12 months. The company remained rock solid during the pandemic, posting double-digit gains in the past few quarters. With its investments and innovation in the cybersecurity space, CRWD stock will continue to make major waves in the sector.
Crowdstrike has robust financials, and its cloud-native Falcon security platform value proposition will strengthen its bull case. This year’s guidance for the first quarter bumped by 7.5% to around $290 million after an incredible fourth quarter. Moreover, forecasts for revenues in the fiscal year 2022 have also been increased by similar percentages to $1.32 billion.
Despite few international and customer-centric risks, its business is robust and has a spectacular growth outlook.
Zscaler Inc. (ZS)
Zscaler Inc. is a network security provider that enables its users to connect to cloud services and other applications securely. Zscaler is among the cybersecurity firms which weren’t compromised in the SolarWinds hack last year. It was among the companies offering recovery and response solutions. With stellar growth numbers, impressive margins, and an entirely recurring revenue base, ZS stock is one of the most attractive cybersecurity stocks at this time.
Zscaler has been one of the most effective companies in the sector in increasing its billings growth. The figure was 71% higher on a year-over-year basis in its most recent quarter and is a testament to the growing cybersecurity market. Looking ahead, it has provided a conservative estimate for its revenues in the range of $634 million to $648 million. Hence, the future looks bright for ZS stock in scaling its business to new heights.
Fortinet Inc. (FTNT)
Fortinet Inc. is one of the top legacy software providers that has now become one of the world’s largest cybersecurity companies in terms of revenue. Its firewall solutions are the cream of the crop in the sector, which have grown immensely in popularity during the pandemic. With a 82% growth in the past 12 months, FTNT stock is among the best security picks out there.
The company heavily benefited from work-from-home trends, which increased demand for its cybersecurity solutions. Revenues in its most recent quarter grew by 21.7% to $748 million, and its EPS of $1.06 beat estimates by six cents.
Moreover, its free cash flows are at an impressive $907 million in 2020, up from $715 million in 2019.
DocuSign is known to everyone as an e-signature business and it offers one of the most highly underrated cybersecurity stocks. Its enterprise security platform protects users from a variety of cyberattacks. One of its key products from its security suite is Pescatore, which provides a URL classification mechanism. Its cybersecurity revenues won’t supplant its core business, but it’s enough to make DOCU stock an interesting secondary play in the sector.
The company’s cybersecurity offerings add to the stickiness of its ecosystem. The company CEO Dan Springer talked about its positive impact due to the work-for-home trends. Its security suite has had a lot to do with the massive growth numbers. For instance, revenues in the fourth quarter grew by a whopping 57% on a year-over-year basis. This company is expected to grow at a healthy pace for the foreseeable future.
Okta is a global leader in the provision of identity management solutions. It is based around a zero-trust architecture that requires constant user verification before accessing data. Moreover, the stickiness of its platform and integration with more than 7,000 enterprise applications makes it a bona fide leader in its niche. 2020 was another solid year for OKTA stock as it gained over 82% in the past 12 months.
In recent months, the company has been working hard to expand its customer identity segment. It has been a leader in workforce identity solutions but now aims to become a customer identity solution leader. It recently acquired Auth0, which adds a developer-centric twist to its expanding portfolio.
Moreover, earnings results have been off the charts so far, with revenues growing by double-digits in the past years.
Cisco Systems (CSCO)
Cisco develops and sells internet protocol-based solutions to customers across the globe. Most users of Cisco would think of it as a firewall and IDS/IPS specialist. However, it now offers a wide variety of products that cover security analytics, cloud security, and other related areas. Cybersecurity is one of the fastest-growing company divisions, along with its encrypted traffic analytics services. CSCO stock has witnessed relatively modest growth of about 25% in the past 12-months compared to its peers.
For Cisco, the troubling bit is its revenue growth which has been stunted in the past couple of years. The pandemic has negatively impacted sales, leading to negative growth numbers. However, it’s a company in transition, and Cisco is vastly expanding its product base to cater to its demanding user base.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.