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3 Cybersecurity Stocks With Huge Return Potential for Long-Term Investors


  • Here are three cybersecurity stocks with huge return potential for long-term investors.
  • Palo Alto Networks (PANW): This cybersecurity concerns stock is already up 40% on the year.
  • CrowdStrike (CRWD): Analysts say strong growth potential justifies a rich valuation for this stock.
  • Fortinet (FTNT): Demand for this company’s firewall protections is only growing stronger.
cybersecurity stocks - 3 Cybersecurity Stocks With Huge Return Potential for Long-Term Investors

Source: Shutterstock

The cybersecurity sector is hot and will continue to get even hotter. Demand for more advanced and complete cybersecurity services is growing among consumers and companies, as threats to data and sensitive online information grows. According to market research firm Statista, revenue in the global cybersecurity market is forecast to grow at a compound annual growth rate (CAGR) of 10% between this year and 2028, bringing the total annual spend to $256.50 billion.

This year alone, companies around the world are expected to invest an average of $46.54 per employee on their cybersecurity needs at work. And that sum is projected to rise steadily as more sophisticated protections are needed. For these reasons, it is a great time for investors to own cybersecurity stocks. Shares of leading cybersecurity companies have been marching higher this year on expectations of their current and future growth.

Here are three cybersecurity stocks with huge return potential for long-term investors.

Palo Alto Networks (PANW)

Palo Alto Networks (PANW) logo on corporate building
Source: Sundry Photography / Shutterstock.com

Like most technology stocks, cybersecurity concern Palo Alto Networks (NASDAQ:PANW) had a difficult time in 2022. However, the stock has mostly erased its losses from the past year thanks to a 40% year-to-date (YTD) rally. PANW stock is now only 4% lower than where it was trading at 12 months ago. The shares bottomed on January 10 and have rocketed upwards ever since, fueled by solid earnings growth and strong free cash flow generation.

In late February, the company announced a strong earnings beat and lifted its forward guidance. Palo Alto reported earnings per share (EPS) of $1.05, which was well ahead of the 78 cents a share consensus forecast of analysts who cover the company. The company also called for $3.97 to $4.03 in EPS for all of this year, up from previous guidance of $3.37 to $3.44. Palo Alto also continues to expand its cybersecurity offerings through acquisitions, recently completing a $195 million purchase of Cider Security.

CrowdStrike (CRWD)

A sign with the Crowdstrike (CRWD) company logo
Source: VDB Photos / Shutterstock.com

Another leading cybersecurity stock that is still recovering from a huge selloff last year is CrowdStrike (NASDAQ:CRWD). Similar to Palo Alto Networks, CRWD stock has had a big run this year, having gained 28% since January. However, despite the rally, CrowdStrike’s stock remains 39% below where it was 12 months ago. Much of the downturn in the company’s share price stems from overvaluation. Even with the big selloff of the past year, CrowdStrike’s stock currently trades at a forward price-to-earnings ratio of more than 50, which isn’t cheap.

Yet fans of the company claim that CRWD stock’s rich valuation is justified given its continued growth. In its last fiscal year, CrowdStrike reported that it grew its customer base 41% year-over-year to 23,019. More than half of Fortune 500 companies are now clients of CrowdStrike, and counting. The consensus view of analysts is for the company to grow its revenue 73% to $3.87 billion by 2025. Additionally, CrowdStrike is forecast to grow its earnings by 56% a year for the next five years. That sort of growth would be impressive.

Fortinet (FTNT)

The Fortinet logo on a wall
Source: Sundry Photography / Shutterstock.com

For a cybersecurity stock that is actually up on the year, check out Fortinet (NASDAQ:FTNT). The company’s stock has gained 36% ytd, pushing it into the green by 2% over the past 12 months. Fortinet, which focuses on firewalls and intrusion detection systems, has been going gangbusters as demand for cybersecurity services grows stronger. For its most recent earnings from the fourth quarter of 2022, Fortinet reported revenue of $1.28 billion, up 33% from a year ago. EPS in the quarter grew 76% year-over-year to 44 cents.

The earnings beat propelled FTNT stock 15% higher in a single trading session. Ahead of the company’s Q1 earnings release on May 4, analysts at investment bank TD Cowen reiterated their “buy” rating on Fortinet stock and gave the shares a price target of $85, which is nearly 30% higher than where they are currently trading. According to TD Cowen, Fortinet is well-positioned to continue growing as demand for cybersecurity services escalates in coming years.

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.

Article printed from InvestorPlace Media, https://investorplace.com/2023/04/3-cybersecurity-stocks-with-huge-return-potential-for-long-term-investors/.

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