Cybersecurity stocks are in the limelight, especially because the Russian invasion of Ukraine may lead to cyber wars. With economic sanctions imposed on Russia by the U.S. and Europe, investors are increasingly worried cyberattacks against Ukraine and other targets may occur.
Even before the invasion began, numerous ransomware attacks and data breaches unrelated to the conflict caused significant damage for enterprises. As a result, investment bank Wedbush analyst Dan Ives suggests, the growth stories related to cybersecurity are “unmatched to what we have seen the last decade.”
Similarly, market research firm Gartner suggests global cybersecurity spending will jump 11% in 2022 to $172 billion from $155 billion in 2021. Yet, worries about inflation and rate hikes have pushed high-growth cybersecurity stocks down to more reasonable valuations.
The price decline has created an attractive buying opportunity in the cybersecurity space. However, short-term volatility should remain high. With that said, here are seven cybersecurity stocks that should continue to thrive in the long-run:
- Cloudflare (NYSE:NET)
- CrowdStrike (NASDAQ:CRWD)
- Fortinet (NASDAQ:FTNT)
- Palo Alto Networks (NASDAQ:PANW)
- SentinelOne (NYSE:S)
- Tenable Holdings (NASDAQ:TENB)
- Zscaler (NASDAQ:ZS)
Cybersecurity Stocks: Cloudflare (NET)
52 week range: $63.25 – $221.64
We start with San Francisco, California-based Cloudflare, a cloud security and content delivery network (CDN) services provider. The company relies on its global network to protect corporate resources and infrastructure. Cloudflare One is a secure access service edge (SASE), providing employees with a fast and secure connection to business applications.
Cloudflare released fourth-quarter 2021 results on Feb. 10. Revenue totaled $193.6 million, up 54% year-over-year (YOY). Net income came in at $100,000 compared to a net loss of $7.4 million in the prior-year quarter. Cash and equivalents ended the period at $1.82 billion.
Its total number of large customers, or those spending more than $100,000 annually, increased 71% in 2021. Cloudflare’s Q4 net retention rate stood at 125%, meaning customers spent $1.25 for every $1 they spent during the same quarter last year. The company is guiding for about 42% revenue growth in 2022.
Cloudflare stock trades around $95, up more than 34% over the past 12 months. Despite dropping 27% year-to-date (YTD), shares still have a lofty valuation at 52 times trailing sales. The 12-month median price forecast for Cloudflare stock stands at $147.
52 week range: $150.02- $298.48
Sunnyvale, California-based Crowdstrike is currently the largest pure-play security vendor by market capitalization. Its Falcon architecture offers cybersecurity solutions powered by artificial intelligence (AI). It provides endpoint security services and proactive threat intelligence offerings.
Crowdstrike announced strong Q3 FY 2022 results in early December. Revenue increased 63% YOY to $380.1 million. Adjusted net income stood at $41.1 million, or 17 cents per diluted share, up from $18.6 million a year ago. Free cash flow was $123.5 million. Cash and equivalents ended the quarter at $1.91 billion.
As of Oct. 31, 2021, annual recurring revenue (ARR) increased 67% YOY to $1.51 billion. In addition, more than two-thirds of existing subscribers have purchased four or more cloud-module subscriptions, which lifted the adjusted subscription gross margin to almost 80%.
CRWD stock trades around $193. Shares have declined more than 35% from their peak in November, yet they are still not cheap, trading at 204 times forward earnings and 31.8 times trailing sales. The 12-month median price forecast for Crowdstrike stock is at $257.
Cybersecurity Stocks: Fortinet (FTNT)
52-week range: $167.08 – $371.77
Next up is Sunnyvale, California-based Fortinet, a cybersecurity vendor focused on designing firewalls and the chips that power them. Fortinet’s products include firewalls, unified threat management appliances and network security. These products run on the company’s security platform, Security Fabric.
Fortinet issued Q4 2021 results in early February. Revenue increased 29% YOY to $963.6 million. Net income came in at $205.8 million, or $1.23 per diluted share, up from $175.5 million, or $1.06 per diluted share, in the prior-year quarter. Cash and equivalents ended the period at $3 billion.
Growth in 2021 was primarily fueled by a 37% increase in product revenue. As a result, free cash flow in 2021 soared 32% YOY to a record $1.2 billion. Thanks to a new upgrade cycle in data centers and networking equipment, management is forecasting at least another 28% increase in sales in 2022.
FTNT stock is currently valued at about $280, up 57% over the past 12 months. Shares are trading at 66.2 times forward earnings and 16.3 times trailing sales. The 12-month median price forecast for Fortinet stock stands at $361.
Palo Alto Networks (PANW)
52-week range: $311.56 – $598.96
Palo Alto Networks remains the largest pure-play cybersecurity operation by revenue. The company is a leader in various categories, including enterprise firewalls, endpoints, security automation, zero-trust access and vulnerability management.
Palo Alto released Q2 FY22 results on Feb. 22. Revenue grew 30% YOY to $1.32 billion while billings increased 32% YOY to $1.61 billion. Net income grew 20% to $185 million, or $1.74 per diluted share, up from $154.2 million a year ago.
Its next-generation cloud-based security services and AI-powered threat detection platform remain key growth drivers. As a result, Palo Alto Networks estimates its Q3 billings to grow 24% to 25% and total revenue will increase 25% to 27%.
PANW stock currently exchanges hands around $545, up more than 56% over the past 12 months. Shares are trading at 81.3 times forward earnings and 11.6 times trailing sales. The 12-month median price forecast for Palo Alto Networks stock is at $622.50.
Cybersecurity Stocks: SentinelOne (S)
52 week range: $31.83 – $78.53
Next on the list is Mountain View, California-based SentinelOne, which operates an AI-powered endpoint security platform that identifies and stops cyberattacks in real-time. In June 2021, an initial public offering (IPO) raised $1.2 billion in cash and valued the company at $10 billion.
SentinelOne announced Q3 FY22 results on Dec. 7. Revenue increased 128% YOY to $56 million. However, non-GAAP net loss widened to $39.9 million, or a 15-cent loss per diluted share, compared to a loss of $25.6 million in the prior-year quarter. Cash and equivalents ended the period at $1.7 billion.
InvestorPlace users will appreciate that its customer count grew by more than 75% YOY in Q3. While the company generated 67% of its revenue in the U.S., its share of international income increased 159%. Customers include prominent brands such as Samsung (OTCMKTS:SSNLF) and Electronic Arts (NASDAQ:EA).
Meanwhile, SentinelOne recently announced a new collaboration with its peer Zscaler. The joint offering will provide advanced threat detection across networks and cloud applications.
The company forecasts triple-digit YOY revenue growth in Q4. SentinelOne stock is priced at $34, down 56% from its 52-week high in November and down 34% YTD. Shares are trading at 61.2 times trailing sales. The 12-month median price forecast for SentinelOne stock stands at $65.
Tenable Holdings (TENB)
52 week range: $35.32 – $57.70
Columbia, Maryland-based Tenable is the industry leader in threat detection and vulnerability management. Its main product, Nessus, is the most-deployed vulnerability management tool in the industry, serving 30,000 organizations. The platform offers protection against more than 68,000 common vulnerabilities and exposures.
Tenable issued Q4 2021 results in early February. Revenue increased 26% YOY to $149 million. However, non-GAAP net income declined to $5.9 million, or 5 cents per diluted share, down from $14.4 million a year ago. Free cash flow stood at $95.2 million. Cash and equivalents ended the period at $278 million.
Tenable focuses on building specific solutions for different industries, including financial services and the auto industry. Analysts project the company will turn profitable on a GAAP basis in 2022 at 17 cents per share.
TENB stock trades slightly below $55, up nearly 30% over the past 12 months. Shares are trading at 10.25 times current sales. The 12-month median price forecast for Tenable Holdings stock is at $65.
Cybersecurity Stocks: Zscaler (ZS)
52 week range: $157.03 – $376.11
Our last stock for today is the San Jose, California-based Zscaler, a security-as-a-service (SaaS) firm. The company offers cloud-delivered solutions to protect user devices and data. Zscaler works in tandem with endpoint security services to help keep data secure.
Zscaler released Q2 FY22 results on Feb. 24. Revenue grew 63% YOY to $255.6 million. As a result, net income rose 37% to $19.2 million, or 13 cents per share, up from $14 million a year ago. Cash and equivalents ended the quarter at $1.6 billion.
InvestorPlace users will undoubtedly be aware billings are crucial for forecasting future revenue growth. It grew 59% YOY to $367.7 million, down from 71% growth in the previous quarter.
Management estimates fiscal 2022 full-year revenue will be roughly $1.05 billion and billings will reach $1.37 billion. The estimate represents 56% and 47% YOY growth, respectively, yet implies a slowdown in Zscaler’s expansion rate.
Zscaler stock trades at $208 per share, up 12% over the past year. Shares are trading at 35.7 times trailing sales. 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.