If there’s one sector that has been hot this year, it’s cybersecurity stocks. The stocks in the group performed well during the pandemic thanks to the shift to working from home.
As that shift accelerated the need to safeguard websites, intranets and other aspects of remote online work became more critical than before.
Cybersecurity stocks bolted into the stratosphere beginning this May after high profile cyberattacks on the Colonial Pipeline that threatened U.S. energy security and also on JBS (BVMF:JBSS3), the world’s largest meat processing company, which threatened the food supply.
These attacks were a stark reminder of the dangers posed by hackers and cyber terrorists and put online security front-and-center on the agenda of President Biden, as well as members of Congress.
In August, Biden convened a cybersecurity summit at the White House, after which many of America’s largest companies pledged to spend billions of dollars to strengthen online security for individuals, corporations and governments at all levels.
As online breaches remain on the front burner, we look at three of the best cybersecurity stocks to buy in 2021.
Best Cybersecurity Stocks to Buy: CrowdStrike (CRWD)
Few stocks have had a better run than leading cybersecurity firm CrowdStrike. Shares have risen 52% in the past six months, with most of that gain coming after the Colonial Pipeline hack occurred in mid-May.
At $265 per share, CRWD stock is looking a little stretched right now. However, Wall Street seems to feel that the shares should still have a little gas left in the tank.
The median price target on CrowdStrike stock is currently $313, suggesting that the share price could run up another 15% over the next 12 months.
Beyond the political and corporate focus around cybersecurity, CRWD stock has also gotten a lift from the company’s continued growth and expanding market share.
In its just-released quarterly results, CrowdStrike reported that its revenue grew 70% year-over-year to $337.7 million, beating analysts’ estimates by nearly $15 million.
Subscription revenue for its cybersecurity products climbed 71% higher and accounted for 94% of its top line revenue. The company’s net income increased 228% to $25.9 million, or $0.11 per share, also beating analysts’ expectations.
CrowdStrike is ahead of the cybersecurity pack when it comes to innovation. The company’s cloud-based cybersecurity solutions distinguish it from older cybersecurity companies that still install onsite appliances.
With all its cybersecurity tools situated in the cloud, CrowdStrike is one of the more cutting-edge cybersecurity firms today. Investor interest has also been peaked by the fact that CrowdStrike is joining the technology-focused NASDAQ 100 stock index, barely two years after its 2019 initial public offering (IPO).
Cloudflare (NET)
One of the few cybersecurity stocks to outperform CrowdStrike this year has been Cloudflare. NET stock has climbed 113% higher over the past six months to now trade at nearly $128 per share.
The company’s share price has moved in one direction since May — up. At its current price, the stock is approaching analysts’ median target of $130.
The high estimate on the shares is currently $140, and NET stock seems to have gained additional momentum since reporting its latest earnings on August 5.
While Cloudflare’s second-quarter earnings easily beat analyst expectations, investors especially liked the forward guidance provided by the company that specializes in content delivery networks (CDNs) and cybersecurity services.
Cloudflare forecasts that its revenues will rise 44%-45% year-over-year in the current third quarter, and grow 46%-48% for the full year. The company’s technology is used to secure websites around the world, and Cloudflare continues to grow by leaps and bounds.
The company now operates in 100 countries and processes an average of 25 million requests every second of every day. At its current growth rate, Cloudflare’s annual revenue could more than triple to $2.1 billion within the next five years.
Palo Alto Networks (PANW)
Palo Alto Networks has also enjoyed a bull run this year, albeit not quite as strong as CrowdStrike or Cloudflare.
In the past six months, PANW stock has gained 39% and now trades at $465 per share. The stock pulled back in mid-August but has climbed 28% since August 19 on the back of stronger than expected fiscal fourth-quarter earnings.
The software-as-a-service company reported strong cash flow, improved profitability and sales that increased nearly 30% year-over-year, all of which was music to investors’ ears.
Palo Alto Networks also provided rosy forward guidance, forecasting that its revenue will grow 24% in its fiscal 2022 year that just began.
The company is hosting an investor conference on Sept. 13 and has promised to provide analysts and shareholders with even more good news pertaining to its long-term growth and earnings outlooks.
Palo Alto Networks may also unveil new information about its next-generation cybersecurity services, which include its cloud security platform “Prisma” and its artificial intelligence powered threat detection platform called “Cortex.”
Disclosure: On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
