- Cloudflare (NET): Management intends to spend aggressively on innovation and customer growth.
- SentinelOne (S): Investors cheered the robust Q4 results of mid-March
- Zscaler (ZS): The deceleration in Zscaler’s billings growth has created strong headwinds recently, giving a better entry point into the share price.
Cybersecurity stocks are getting increased attention as the war in Ukraine unnerved many U.S. and European companies regarding possible cyber attacks. In recent weeks, both President Joe Biden and the FBI warned U.S. firms to be vigilant against hacks.
Recent data highlights: “In 2023 alone, cybercriminals will steal 33 billion records. Americans lose $15 billion annually due to identity theft.” Metrics further suggest Russia and China devote considerable resources to cyber warfare.
Over the past 52 weeks, the S&P Kensho Cyber Security Index returned more than 22%. Meanwhile, in the past several years, a number of pure-play cybersecurity exchange-traded funds have also been launched. For instance, the Global X Cybersecurity ETF (NASDAQ:BUG) is up 26.5% in the past year, but is roughly flat in 2022.
Most cybersecurity shares, including those on our list, have come under pressure in recent months. Despite these declines many still trade at premiums to a number of other tech segments. Therefore, we could expect further volatility in these names in the months ahead.
With that information, here are three cybersecurity stocks that deserve to be on your watchlist in April.
Cybersecurity Stocks: Cloudflare (NET)
First on our list is Cloudflare (NYSE:NET), a global cloud computing pioneer that offers systems for a faster as well as more secure and reliable Internet. The company serves over 140,000 paying customers globally. In other words, it has been able to capitalize on the secular tailwinds in the cybersecurity space.
Cloudflare announced stellar Q4 2021 results on Feb. 10. Revenue increased 54% year-over-year to $193.6 billion. Net income came in at $131,000, compared to a net loss of $7.4 million in the year-ago period. The company ended the quarter with $333.7 million in cash and equivalents.
Looking ahead, management intends to spend aggressively on innovation and customer growth. Cloudflare currently has close to 1,510 large customers that generate over $100,000 per year.
NET stock is down about 9% year-to-date. Meanwhile, the 52-week range has been $63.25 to $221.64. Shares are trading at 56x trailing sales. Finally, the 12-month median price forecast for Cloudflare stock stands at $147.
SentinelOne (S)
Next up on today’s list is SentinelOne (NYSE:S), an autonomous cybersecurity company. It provides artificial intelligence-powered solutions to protect and secure endpoint systems storing and processing data. Many of our readers would know that endpoints include smartphones computers or other mobile devices.
On March 15, SentinelOne released Q4 2021 results. Revenues soared 120% from a year ago to $65.6 billion. Yet, non-GAAP net loss increased to $43.9 million, or 17 cents per diluted share, compared to a loss of $31.7 million in the prior-year quarter. Cash and equivalents were $1.7 billion at quarter-end.
Steady customer growth and rising annual recurring revenue (ARR) indicate a bright outlook for the company. The number of total customers which exceeded 6,700 represented an increase of 70% from the previous year. Meanwhile, customers with ARR over $100,000 grew 137% in a year to 520.
The company went public in June 2021 at an opening price of $46. Then by the end of November, it reached an all-time high of $78.53.
Yet, like, many of its peers, S stock has also declined almost 20% since January and saw a record low of $29.30 on March 14. Shares are now changing hands at 35.4x trailing sales and 6.7x book values. Meanwhile, the 12-month median price forecast for SentinelOne stock is $49.
Zscaler (ZS)
Last on our list is Zscaler (NASDAQ:ZS), a cloud-native security service network designed on a zero-trust architecture. The platform primarily monitors internal and web-based traffic with over 150 data centers globally.
ZS issued robust Q2 results on Feb. 24. Revenue of $255.6 million implied a growth rate of 63% in a year, the highest in three years. Adjusted net income was $19.2 million, or 13 cents per share. Cash and equivalents stood at $409.8 million. Free cash flow of $29.4 million accounted for 12% of revenues.
Like our previous two companies, in recent months, Zscaler has also gained more large customers. At quarter-end, it had 251 customers that spent over $1 million in ARR, up 85% from a year ago.
ZS stock is down more than 28% since the beginning of 2022, mainly due to the recent tech sell-off. The 52-week range has been $157.03 to $376.11. Shares are trading at multiples of 416.7x forward earnings and 37.6x trailing sales. Finally, the 12-month median price forecast for Zscaler stock stands at $325.
On the date of publication, Tezcan Gecgil 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.
