Did cybersecurity companies win second-quarter earnings season? It certainly appears that way after nearly all of the leading cybersecurity companies beat Wall Street forecasts, sending their share prices up 10% or more as a result. While mega-cap tech stocks posted mixed Q2 results, and disappointing retailers complained about in-store theft, cybersecurity firms hit one homerun after another on growing demand for their products and services. Cybersecurity remains one of the fastest growing areas of technology right now. Consulting firm McKinsey & Co. sees a $2 trillion market for cybersecurity as businesses and individuals worldwide increasingly rely on more sophisticated products to protect them from cyberattacks, identity theft, and to manage access to their various electronic devices. Now viewed as a necessary business expense, spending on cybersecurity is likely to only accelerate in coming years. Here are three cybersecurity stocks to buy and hold right now.
Palo Alto Networks (PANW)
Shares of Palo Alto Networks (NASDAQ:PANW) jumped 12% at the end of August as the cybersecurity company issued financial results that were much better than expected on Wall Street. It was a relief rally of sorts as PANW stock declined 16% leading up to Q2 print and investors worried that the company’s decision to announce its results after markets closed on a Friday was a sign of problems. Not so, as it turned out.
Palo Alto Networks reported fiscal fourth quarter earnings per share of $1.44 versus $1.28 that had been expected by analysts who cover the company. Revenue in the quarter ended July 31 totaled $1.95 billion versus $1.96 billion that was anticipated. Revenue rose 26% from a year earlier as demand for the company’s cybersecurity products grows stronger. While the company’s forward guidance came in softer than analysts would have liked, the overall view appears to be that Palo Alto Networks remains a leading cybersecurity concern.
PANW stock has now risen 75% this year and is up 220% over five years.
CrowdStrike (CRWD)
Cybersecurity firm CrowdStrike Holdings (NASDAQ:CRWD) is another among the cybersecurity stocks to buy and hold now. It too reported better-than-expected results at the end of August, sending its share price higher as well. The company announced Q2 EPS of 74 cents, which was far ahead of Wall Street’s consensus forecast of 56 cents. Revenue during Q2 came in at $731.6 million, up 37% from a year ago. That too was ahead of analyst expectations of $724.1 million. Free cash flow stood at $188.7 million at the quarter’s end, up 39% from $135.8 million a year earlier.
Looking ahead, CrowdStrike said it expects revenue of $775.4 million to $778 million and 74 cents in earnings for the current third quarter. Wall Street had been looking for $774 million in revenue and 60 cents in profits for the current third quarter. Analysts and investors had nothing to quibble about regarding the Q2 results and forward guidance. Consequently, CRWD stock has risen nearly 10% in recent weeks even as the broader market has pulled back. CrowdStrike’s shares have now gained 60% this year and are up 157% through five years.
Okta (OKTA)
Rounding out the parade of strong earnings, we have Okta (NASDAQ:OKTA). The company’s share price vaulted 10% higher immediately after it reported its latest financial results. The company, which specializes in identity verification and access management, posted Q2 EPS of 31 cents on revenue of $556 million. Analysts who track the company had penciled in earnings of 22 cents on revenue of $535 million. Okta also raised its guidance and provided a strong outlook for both Q3 and all of this year, leading investors to cheer.
Okta, which uses cloud identification software that enables people to access multiple platforms with a single sign-on, said it is benefitting from the successful integration of several acquisitions it made over the last few years. The improved financials and positive guidance led many analysts on Wall Street to revise up their targets on OKTA stock, with investment bank Guggenheim Securities lifting its target on the share price to $100 from $96 previously.
OKTA stock has gained 26% this year and is up 22% over the past five 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.
