Companies are continuously facing new challenges on the cybersecurity front as hackers constantly find new ways of attacking firms’ systems. Moreover, Gartner, the highly respected IT research firm, predicts that “By 2025, the consumerization of AI-enabled fraud will fundamentally change enterprise attack(s).” Also noteworthy is that, in this very tight labor market, hiring a sufficient number of well-trained cybersecurity employees is difficult. Consequently, in the current environment, companies with superb IT security offerings should thrive, making this a great time to buy the best cybersecurity stocks.
Additionally, companies can lose vast amounts of money and extremely valuable information while their brands can take major hits from just one successful cyberattack. As a result, they will pay cybersecurity vendors a great deal of money to protect them from these consequences.
Here are three cybersecurity stocks that are poised to get big boosts from continued high spending on IT security.
CyberArk (CYBR)
Investment bank Piper Sandler recently named CyberArk (NASDAQ:CYBR) as one of its top five tech picks. The bank expects the company to benefit from its strong identity management and privileged access management offerings.
In the first quarter of 2023, CYBR’s subscription revenue soared a very impressive 78% year-over-year (YoY), indicating that many more companies are seeing the high value of using its offerings over the long term.
Moreover, CyberArk CEO Matt Cohen reported on the company’s Q1 earnings call that its orders were growing by record amounts. He added that CyberArk’s offerings provide good protection against weaponized AI attacks which are becoming prevalent. Moreover, CYBR is using AI to provide organizations with enhanced cybersecurity.
Palo Alto Networks (PANW)
A top cloud security vendor, Palo Alto’s (NASDAQ:PANW) Secure Access Service Edge offering, or SASE, which secures business’ cloud data, is on fire. Specifically, its annual recurring revenue (ARR) from SASE is growing over 50% annually and the business has over 4,200 customers. Further, the ARR of its Next-Gen Security offerings is jumping 60% YoY.
Nonetheless, PANW stock fell 7% on July 12 because Microsoft (NASDAQ:MSFT) unveiled an offering that will provide cloud security services.
But for a few reasons, I don’t expect MSFT’s new offering to meaningfully hurt Palo Alto. First, according to UBS, Microsoft is expected to target small and medium business, while Palo Alto is focused on large firms.
Secondly, Microsoft is not well-known as an IT security vendor, a fact that will complicate its efforts to get firms to adopt its IT security offerings. And finally, the IT security market is so huge that there’s plenty of room for Microsoft, Palo Alto and many other companies to grow very rapidly and prosper within it.
Given these points, I believe that the weakness of PANW stock has created a good buying opportunity.
Fortinet (FTNT)
Morgan Stanley recently stated that Fortinet (NASDAQ:FTNT) is one of several companies with “favorable setups” going into the second-quarter earnings season.
Moreover, the bank says that its research indicates that Fortinet’s business was “solid” in Q2, with the company’s market share increasing. Further, Morgan Stanley believes that FTNT’s Q2 results can come in above analysts’ average estimates.
In Q1, FTNT’s top line jumped 32% YoY, while its billings increased 30% YoY. Additionally, its free cash flow, excluding some items, climbed to $662 million from $366 million in Q1 of 2022.
Investor’s Business Daily identifies FTNT as the top name in cybersecurity and gives the shares its top composite rating of 99. The stock has a relative strength score of 91, indicating that institutions have been buying a great deal of the shares over the last year.
On the date of publication, Larry Ramer did not hold (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.
