Cybersecurity stocks remain one of the hottest sectors for investors looking for growth in 2021. The global pandemic spawned by the novel coronavirus became the catalyst to a massive technological shift to support remote work. Once thought to be too expensive, too complicated, too (fill-in-the-blank) to consider, it suddenly became a necessity. Cybersecurity is at the forefront of this technological shift.
And it’s a trend that’s likely to continue. The reason for that is that remote work, in one form or another, is likely to continue. According to a Gartner HP survey, up to 41% of employees are likely to work remotely at least some of the time once the pandemic ends. And with cybercrime one of the largest issues facing every business today, it’s not a surprise that businesses are looking for companies that are capable of managing their cybersecurity.
In 2020, many cybersecurity stocks moved steadily higher. That narrative continued into 2021 until recently. As part of the tech selloff, many of these stocks have not been left out. However this is creating an opportunity for savvy investors to pick up these stocks at a discount they may not see for some time to come.
Here are seven cybersecurity stocks that will remain vital as the world continues to work from home:
- Cisco Systems (NASDAQ:CSCO)
- Palo Alto Networks (NYSE:PANW)
- Crowdstrike Holdings (NASDAQ:CRWD)
- Zscaler Inc. (NASDAQ:ZS)
- Cloudflare Inc. (NYSE:NET)
- Okta (NASDAQ:OKTA)
- DocuSign (NASDAQ:DOCU)
Cybersecurity Stocks: Cisco Systems (CSCO)
Cisco Systems bucked the larger trend with cybersecurity stocks. Shares of CSCO stock dipped dramatically in late summer of last year and didn’t start to recover until November. However, the stock has also not seen the dramatic dip that has gripped other stocks in this sector.
One reason for that, perhaps, is that Cisco is seen these days as a value stock. The company’s revenue has been a bit flat for the liking of some investors. However, Cisco offers a compelling dividend. The company has increased its dividend for the last 10 years and has a payout ratio of just over 50%, which suggests the dividend will be safe for years to come.
That means that the company has approximately half of its net income available for a variety of investments, stock buybacks and perhaps to increase the amount of future payouts.
Growth investors will need to have some patience, but Cisco may reward them with strong growth to go along with a dividend.
Palo Alto Networks (PANW)
Palo Alto Networks is an example of a company that is seeing its stock fall without a really good reason. Since the company posted earnings in February, PANW stock is down approximately 20%. Some of this may simply be profit-taking. However, with the stock price down to levels not seen since last December, investors should see this dip as a buying opportunity.
Unlike Cisco Systems, Palo Alto doesn’t pay a dividend. But the company raised its full-year guidance. For the full-year, Palo Alto is forecasting revenue to increase 22% to 23%. This is higher than the company’s prior guidance for revenue growth of 20% to 21%. And the company also expects adjusted earnings to grow between 19% and 21%.
Some of this is due to Palo Alto’s introduction of two new platforms that are generating annual recurring revenue (ARR). And the company is realizing an increase in deferred revenue as well. It’s also music to investors’ ears, as Palo Alto has been on an acquisition spree as of late.
CrowdStrike Holdings (CRWD)
CrowdStrike provides a wide range of solutions focused on real-time endpoint security, threat intelligence and cloud workload protection. All of this is done to prevent cyberattacks on and off an enterprise’s network. And during the pandemic, the company has put together a cybersecurity resource center that, in their words, “guide[s] you through the security risks, infrastructure challenges, and the sheer volume and variety of cyberthreats.”
The company appears to be another exceptional buy-on-the-dip candidate. Despite posting a double beat in their earnings report, the stock dropped approximately 10% and was down almost 20% in the month of March. However, the company is a relative new kid on the block. It’s only been publicly traded since 2019 and is up 184% in that time.
In its most recent earnings report, the company posted a 74% year-over-year increase in revenue, and, although the company is not yet profitable, it cut its posted negative earnings per share to 9 cents, which was significantly higher than the negative 14 cents in the prior year. Additionally, the company attracts significant interest from institutional investors that own about 74% of the stock.
Zscaler Inc. (ZS)
Zscaler is another niche player that is set up to thrive as remote work becomes the new normal. The company helps users safely browse the internet and access applications regardless of their device, location or network.
Zscaler just got an upgrade from Truist analyst Joel Fishbein, who gave the company a price target of $225, which is a gain of approximately 28% from its current level. Fishbein wrote, “Zscaler is benefiting from a favorable demand backdrop following the SolarWinds hack …” The analyst went on to cite the company’s secular tailwinds of digital transformation, cloud security and Zero Trust architecture.
In the last 12 months, ZS stock is up 184%, and that is despite the company’s stock being down nearly 12% so far in 2021. The company has only been a publicly traded stock since 2018. However, the company has over 20% of the Fortune 500 among its customer base of approximately 4,000 customers.
Cloudflare Inc. (NET)
Cloudflare is a niche player in the cybersecurity sector. The company is a leader in edge computing. It offers services like DDoS (distributed denial-of-service) mitigation and internet security to manage the traffic that consumers go through online.
Cloudflare just had its initial public offering (IPO) on the New York Stock Exchange in 2020. But it’s already been garnering interest from hedge fund portfolios. In the last year, a total of 44 hedge funds include the stock. That’s above its previous high of 33.
In the last year, NET stock is up 197%. This is despite the stock being down about 7% in the last month, largely due to getting caught up in the tech selloff. In the company’s most recent earnings report, the company posted revenue that was approximately 50% higher than the same quarter in the prior year. This leaves some analysts concerned that the company has little room for error.
Okta operates in the sector of identity authentication. Essentially, the company seeks to help ensure that companies can easily identify, verify and enforce who accesses a network at any time. To do so, the company uses everything from traditional passwords to biometrics. The company is growing rapidly and now has over 8,000 clients.
OKTA stock is up 92% in the last 12 months. In fiscal year 2021, the company grew revenue 43% on a year-over-year basis. The stock is down approximately 15% over the last month. Some of this was due to softer guidance in the company’s earnings report, and some of it was also due to the company’s announcement that they would be acquiring Auth0 for $6.5 billion.
Analysts remain bullish on the stock, even though several have lowered their price target for the company. Okta is a clear leader in the niche sector it occupies, making it an ideal buy-on-the-dip candidate among cybersecurity stocks.
Ending our list today is a company that wouldn’t necessarily be top-of-mind when it comes to cybersecurity stocks. However, DocuSign has a global enterprise security program that allows it to protect its customers from cyberattacks such as phishing, which remains a growing threat. One of the company’s signature products that help to that end is Pescatore, which is a unique URL classification system.
The company’s cybersecurity services aren’t likely to supplant the revenue that DocuSign gets from its core e-signature business. However, it does help make the business more sticky, which should help the company retain customers and generate more recurring revenue. To that end, DocuSign CEO Dan Springer estimates the company got 10 extra percentage points of growth in fiscal 2021 due to shifting work requirements due to the pandemic. For next year, the company is projecting 31% growth.
DOCU stock is up 124% in the last 12 months. But like many of the stocks on this list, it’s down 7% year-to-date.
On the date of publication Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.