Tech investors know what a roller coaster ride that sector can be. A sector that exemplified the highs and lows in 2021 was cybersecurity stocks. Many of these stocks were outperforming the broader market for a good part of the year. But many just as quickly gave up most, or all, of those gains.
Nevertheless, this sector will continue to outperform the market in 2022. The reason is simple. The need for cybersecurity has never been greater. And with so much work moving to the cloud, information technology (IT) professionals face a range of threats that are becoming increasingly sophisticated. Those threats will only become greater as workers return to the office.
According to the firm Cybersecurity Ventures, the total damage inflicted by cybercrime in 2021 will be $6 trillion. A more concerning statistic is that the same firm expects that number to grow by 15% a year, meaning that by 2025 damage from cybercrime will total $10 trillion. “Companies that won’t adopt cybersecurity defense won’t stay in business,” warned Moran Ashkenazi, JFrog’s (NASDAQ:FROG) chief security officer and VP of security engineering. “They will get hacked and shut down – there won’t be other options,” she said in a recent interview.
That’s why when considering stocks to add in the new year, cybersecurity stocks deserve consideration. I invite you to keep reading about seven cybersecurity stocks that are on track for a stellar 2022.
- CrowdStrike Holdings (NASDAQ:CRWD)
- Zscaler (NASDAQ:ZS)
- Microsoft (NASDAQ:MSFT)
- Palo Alto Networks (NASDAQ:PANW)
- Okta (NASDAQ:OKTA)
- Fortinet (NASDAQ:FTNT)
- Tenable Holdings (NASDAQ:TENB)
It is also worth noting here that the potential in these stocks hasn’t been lost on exchange-traded fund managers, as several of the names are also top holdings in what ETFtrends.com considers the best cybersecurity ETFs. PANW, ZS and CRWD are in among the five largest holdings in First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) and Global X Cybersecurity ETF (NASDAQ:BUG). As thematic investing took off in 2021, BUG was among top asset-gatherers among thematic funds with inflows of $800 million last year. ETFtrends editor Tom Lydon wrote last month.
Cybersecurity Stocks: CrowdStrike Holdings (CRWD)
CrowdStrike is a good example of how cybersecurity stocks have given investors steep price movement in 2021. There is a 76.9% difference between the stock’s 52-week high and low. What may trouble investors is that as the year begins, CRWD stock is trading closer to the 52-week low, only weeks after trading hands at the high.
However, this looks like an example of a good stock getting lumped in with the broader sell-off in tech stocks over concerns of the Fed raising interest rates. I believe this because the company’s Dec. 1 earnings report seems to have given CRWD stock a floor.
CrowdStrike provides a wide range of solutions focused on real-time endpoint security, threat intelligence and cloud workload protection. And it’s a software-as-a-service (SaaS) company that is growing its earnings and revenue both sequentially and year-over-year.
Analysts give the stock a consensus price target of $286.85 suggesting a 35% upside. The path to this number may not be straight, but getting in CRWD strike at its current price looks like a steal.
Zscaler has not been immune to the recent sell-off in tech stocks. However, as we near the end of the year, ZS stock is within approximately 12% of its 52-week high set in mid-November. The stock posted a double beat in their most recent earnings report on Nov. 30.
Although Zscaler is a niche player it has a simple, yet vital cybersecurity solution that is essential as workers embrace a hybrid work model. The company provides a solution that lets users safely browse the internet and access applications regardless of their device, location or network. That’s a key reason that Zscaler has a customer base that includes over 20% of the Fortune 500.
ZS stock is up 57% in the last 12 months and is up 100% since closing at a low of $160.92 in mid-May. Analysts suggest the stock has a 13% upside. However, recent upgrades may not be factoring into the company’s stock price.
Cybersecurity Stocks: Microsoft (MSFT)
Microsoft is not a pure-play cybersecurity stock by any means. However, with $10 billion of revenue coming from that part of its business, MSFT stock is not one to be ignored. One reason for that is the company’s ability to integrate its security tools into its Office 365 software which is already based in the cloud.
And if recent purchases are any indication, Microsoft isn’t shy about generating growth through acquisition. In July 2021, Microsoft acquired RiskIQ for approximately $500 million. This was in addition to its purchase of CloudKnow Security in July.
Microsoft stock is up 50% in 2021 and a good bit of that growth is because of the company’s Teams collaboration software. However, the company continues to expand into other high-growth areas such as the metaverse. Nevertheless, MSFT stock is a solid buy for investors who have a lower risk tolerance but still want exposure to cybersecurity stocks.
Palo Alto Networks (PANW)
Palo Alto Networks offers a patented security platform called App-ID that, as its name suggests identifies network traffic by application, user and content. The benefit is that it provides customers with in-depth visibility into all traffic and applications for greater monitoring of potential risks and threats. The company’s platforms are also stand-alone solutions that mean consumers get end-to-end security without needing to use another company.
The question that Palo Alto executives might be asking investors is what took you so long to see that? PANW stock is up 58% for the year. But if you were a holder of the stock in mid-August, you might be losing patience. However, your patience was rewarded. After its earnings report in late August, the stock has been on a tear, gaining almost 54%.
The earnings report may have confirmed to investors that the company is starting to generate recurring revenue after introducing two new platforms earlier in the year. Morningstar’s Mark Cash recently upgraded the firm’s moat rating to wide from narrow, boosting its fair value estimate to $585 a share from $550.
Cybersecurity Stocks: Okta (OKTA)
Okta is another one of the cybersecurity stocks I like because they have carved out a distinct niche. In this case, the company focuses on identity authentication with a “zero trust” approach.
Simply put, Okta delivers solutions ranging from passwords to biometrics to help its customers easily identify, verify and enforce who accesses a network at a given time.
OKTA stock may seem like a curious addition to the list because it’s down 10% for the year and is trading in the bottom half of its 52-week range. However, the stock has been climbing back after a strong earnings report in early December. Analysts still give the stock about a 25% higher price. The company continues to see subscription revenue move higher and it is also growing its free cash flow.
When it comes to cybersecurity stocks, Fortinet certainly should be on the list. Like others outlined here, Fortinet makes my list because it offers a benefit to consumers that is easy to understand in our hyperconnected world. FTNT stock was added to the Nasdaq-100 index in mid December, which CEO Ken Xie said “is another proofpoint of Fortinet’s successes and future growth opportunities.”
Simply put, we’re all online… a lot. And Fortinet, among other things, offers VPN services. My InvestorPlace colleague Josh Enomoto reminded investors that VPN’s are about more than just keeping our internet behavior private, it’s becoming a best practice when it comes to protecting our own cybersecurity.
FTNT stock is up 135% for the year and it’s fair to say that if you’re not currently a shareholder, you’ve likely missed out on the largest gains. Shares of the cybersecurity company have closed positive four weeks in a row and sit at all-time highs, noted StockTwits newsletter The Daily Rip. Nevertheless, this is a quality stock that grew 1,138% in its first 10 years of being publicly traded. With demand for the company’s products and services remaining high, Fortinet is a solid buy for 2022 and beyond.
Cybersecurity Stocks: Tenable Holdings (TENB)
Last on our list of cybersecurity stocks is Tenable Holdings. As its name suggests, Tenable is a holding company that provides cybersecurity solutions to customers through its subsidiaries. The mid-cap company has enterprise customers in industries that include automotive, energy, finance, healthcare, oil and gas, and government.
It’s that last one that caught my attention. The high-profile cyberattack on the Colonial Pipeline has prompted the Biden administration to propose new cybersecurity initiatives. It’s anybody’s guess if these initiatives will find their way through a contentious Congress, but if they do then Tenable Holdings may be a significant player.
TENB stock was a choppy performer in 2021. However since being named one of Daniel Ives at Wedbush Securities’ top two cybersecurity picks for 2022 on Dec.20, 2021, the stock has shot up 4%.
On the date of publication, Chris Markoch 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.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.