- Zscaler (ZS): A valuation of 400 times forward earnings is keeping this stock down.
- Telos (TLS): This company’s stock has struggled since its market debut 18 months ago.
- Cyren (CYRN): A penny stock that has been caught in multiple short squeezes over the past year.
Cybersecurity stocks are red hot right now.
Cybersecurity stocks have been running higher this year. Russia’s invasion of Ukraine and a series of high-profile online attacks targeting major corporations such as Microsoft (NASDAQ:MSFT) have put cyberattacks front-and-center once again.
The threat of cyberwarfare has become so acute that even President Biden has publicly warned corporate America about the risks posed by hackers in Russia and elsewhere.
Companies such as CrowdStrike (NASDAQ:CRWD) and Palo Alto Networks (NASDAQ:PANW) have seen their stocks rise more than 15% year to date.
However, not all cybersecurity stocks are doing well or make for good investments. Some cybersecurity stocks are tanking this year for a variety of reasons and should be avoided.
Here are three cybersecurity stocks that are putting your portfolio in danger and should be sold now.
| ZS | Zscaler | 206.47 |
| TLS | Telos | 8.19 |
| CYRN | Cyren | 2.77 |
Cybersecurity Stocks to Sell: Zscaler (ZS)
Zscaler (NASDAQ:ZS) specializes in protection for cloud computing infrastructure.
The company runs a proprietary cybersecurity platform called the “Zscaler Zero Trust Exchange” that aims to help companies keep their data and employees’ information safe and secure as they migrate their networks to the cloud.
While all this might sound good, Zscaler has been struggling to find its footing in an increasingly crowded cybersecurity sector. This has affected the company’s share price.
Year to date, ZS stock is down 31% at $206 per share, well below its all-time high of $376.11. This puts it in stark contrast to other cybersecurity stocks such a CrowdStrike that have been flourishing in recent months.
The issues affecting Zscaler are that it is unprofitable and has a sky-high valuation. Currently, ZS stock trades at more than 400 times its forward earnings and 32 times this year’s sales, putting it out of favor with many investors.
Telos (TLS)
Doing even worse than Zscaler is cybersecurity firm Telos (NASDAQ:TLS).
Over the last six months, TLS stock has declined 69%, including a nearly 49% pullback so far this year. It trades today at around $8.
Telos is different from most cybersecurity firms in that it is focused primarily on government clients, with the bulk of its revenue coming from contracts it has with the U.S. Department of Defense.
In business since 1969, Telos has established itself as a reliable partner to the U.S. federal government providing data and computer network protection. However, the company never has grown much beyond its niche. Also, despite its age, Telos has only been a publicly traded company since November 2020.
Since its market debut about 18 months ago, TLS stock has declined more than 68% from an all-time high of just under $40 per share reached in January 2021.
Cyren (CYRN)
Perhaps the worst cybersecurity stock to buy right now is Israeli firm Cyren (NASDAQ:CYRN)
So far in 2022, CYRN stock is down 58% to trade at $2.77. Over the past year, the shares have fallen 80% to now trade deep in penny stock territory.
Cyren operates a “security as a service” business model that sees clients pay a monthly subscription fee to receive threat intelligence information from Cyren.
Investors appear to be lukewarm on Cyren’s business model and performance, sending its stocks sharply lower.
It also doesn’t help that CYRN stock has been treated as a meme play several times over the past year and caught in multiple short squeezes.
Most recently, Cyren’s share price jumped 380% from $2.17 on Feb. 23 of this year up to $10.41 on March 8 before collapsing again. That type of volatility should be a warning to investors.
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.
