The world increasingly relies on the internet to store data, make purchases and communicate with friends. While the digital world has provided many benefits, it has also resulted in cybercrime.
Sophisticated hackers use advanced tools and strategies to infiltrate databases and steal valuable resources. Cyberattacks have become common. Sadly, a single incident can wipe out an entire business.
Corporations and small businesses invest billions of dollars into cybersecurity solutions that keep hackers away. The cybersecurity industry reportedly reached $202.72 billion in 2022, with a double-digit compounded annual growth rate fueling more gains through 2030.
Every growing industry presents opportunities for savvy long-term investors. These three cybersecurity stocks look promising and can reward shareholders with long-term gains.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) offers cybersecurity software and solutions for business owners who want to protect their data and digital resources. The company has rewarded investors with gains above 200% over the past five years.
Fortinet shares took a dive in August after slightly lowering earnings guidance. The reduced guidance was minimal but caused the stock to drop by over 25% in one day. The long-term business model remains intact and can generate promising gains.
Shares only trade at 33 forward P/E ratio, which is lower than they have traded at in a while. The cybersecurity firm still delivers reliable revenue and earnings growth for investors. In the second quarter, the company reported 26% year-over-year (YoY) revenue growth and a 53% YoY jump in net income.
Fortinet has not performed well recently. Shares are flat over the past month and are down by roughly 9% over the past six months. Fortinet shares may continue to experience short-term pressure, but the company has compelling fundamentals and plenty of runway.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a cloud computing company serving over 8,000 customers, including large corporations and Fortune 500 companies. These customers use Arista Networks to enhance their productivity and online security.
Arista Networks offers Zero Trust Security for businesses that want to give themselves extra layers of protection. The Zero Trust Security Framework focuses on situational awareness, enforcement and continuous monitoring. The company utilizes artificial intelligence in its products to enhance detection, monitoring and protection.
Arista Networks is rapidly growing and recently achieved record-breaking revenue. The company’s guidance calls for another quarter of record-breaking revenue.
The company reported 38.7% YoY revenue growth in the second quarter, but top-line growth isn’t the only highlight. Arista Networks also generated $491.9 million in GAAP net income, representing a 64.5% YoY gain.
Arista Networks shares haven’t done as well recently. They are roughly flat for the month and are up by 7% over the past six months. The stock’s 49% year-to-date gain and 171% return over the past five years highlight the company’s potential. Shares currently trade at a 33 trailing P/E ratio.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) is a leading cybersecurity company with a $70 billion market cap. Shares have gained 65% year-to-date and have more than tripled over the past five years.
The company reported 26% YoY revenue growth in the fiscal fourth quarter. GAAP net income came in at $227.7 million. The company’s new AI-based security automation platform, XSIAM, helped to attract more customers. Nikesh Arora, chairman and CEO of Palo Alto Networks, expressed excitement about XSIAM in the press release for the fiscal fourth quarter.
Palo Alto Networks projects 18% to 19% YoY revenue growth in the fiscal first quarter of 2024 amid a strong focus on profitability. The firm has healthy financials and a decent amount of cash.
Valuation is the primary concern for investors. The stock has a high 178 P/E ratio, but the company’s 42 forward P/E ratio makes it more manageable. The valuation isn’t for everyone, but long-term investors have been happy so far.
On this date of publication, Marc Guberti held long positions in FTNT and ANET. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
