Data theft, like death and taxes, will always be with us. Vigilance over how data is stored and used is essential. It’s also why cybersecurity investment opportunities are a massive play right now.
According to The Identity Theft Research Center’s latest report, data breaches will break new records this year. There were 951 instances of data being compromised in the second quarter, with over 1,390 events in the first half of 2023. That’s more than was seen at the same point each year between 2005 and 2020. The only year that had more was 2017.
The all-time high for breaches occurred in 2021, when there were 1,862. That means this year could be the greatest incidence of compromised data ever. It’s a good reason you should probably have at least one of these three top cybersecurity stock picks in your portfolio.
Cybersecurity Investment Opportunities: SentinelOne (S)
SentinelOne (NYSE:S) has been in business for about a decade and is growing rapidly. Revenue doubled last year to $422 million and has more than quadrupled over the past two years.
Revenue increased by another 70% in the first quarter. It is why SentinelOne’s stock was hammered. Wall Street worries the cybersecurity expert’s growth is slowing. Yet it’s unrealistic to expect any company to maintain a torrid pace like that. Besides, SentinelOne is now seeing its profit margins improve.
GAAP gross margins widened to 68% from 65%, while adjusted margins grew to 75%. Adjusted operating margin losses narrowed to 38% from 73%.
SentinelOne’s customer base continues to expand, too. It now services half of the Fortune 10 companies. Total customers were 43% greater than they were last year. They now exceed 10,680 customers.
SentinelOne’s stock is down 37% year to date. Considering the improvements it’s enjoying, it means the shares are oversold and present one of the best cybersecurity investment opportunities.
CrowdStrike (CRWD)
Arguably the biggest competitive threat to SentinelOne is its rival CrowdStrike (NASDAQ:CRWD). As I recently wrote, through a combination of human intervention and artificial intelligence, the cybersecurity leader is able to sift through trillions of events weekly. Its Falcon platform is able to recognize and respond to potential threats more quickly over time as it learns and grows.
CrowdStrike has over 23,000 customers or more than double SentinelOne. It includes over half of all Fortune 500 companies. The subscription-based model is customizable. Customers can choose different modules based on the threats or protection they need.
Annual recurring revenue (ARR) has grown from $1.1 billion in fiscal 2021 to $2.6 billion in fiscal 2023. For every $1.00 customer initially spent in 2021, CrowdStrike now realizes $6.07 in ARR from them.
CrowdStrike is very profitable on a free-cash-flow basis. It generated $227 million worth at the end of the first quarter. It’s also producing GAAP profits, too. The cybersecurity expert’s stock is up 47% year to date. Yet shares are still down 12% from a year ago. It is a strong cybersecurity stock to buy now.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is not your typical cybersecurity stock. It is best known as the leading computer graphics processing unit chip maker. Yet Nvidia’s Morpheus platform deeply enmeshes it in cybersecurity.
According to Nvidia’s website, “Morpheus is an open application framework that enables cybersecurity developers to create optimized AI pipelines for filtering, processing, and classifying large volumes of real-time data.”
It combines the power of AI and machine learning to power advanced analytics that detect and eliminate cyber threats.
Nvidia is a natural cybersecurity specialist. Just like rendering complex computer graphics, gathering real-time network data and assessing potential threats requires massive processing power. Nvidia’s chips are some of the most powerful in performing such functions.
The chipmaker obviously has its finger in many pies besides cybersecurity and gaming applications. It’s the diversity of its portfolio that makes it so fearsome. The stock has tripled in value this year as a result.
Nvidia’s shares are not cheap by traditional metrics such as price-to-earnings or price-to-sales. Yet the runway for growth is so long for the company that the chipmaker could be the greatest high-return cybersecurity stock today.
On the date of publication, Rich Duprey 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.
