In an era dominated by digital transformation, the interest in cybersecurity stocks has never been more pronounced. As both people and businesses increasingly rely on advanced technologies, the threat of cyberattacks becomes a growing concern. Over the last several years, cybersecurity companies have seen an explosion in revenue growth. This has been largely driven by increased demand for cloud-based cybersecurity infrastructure. All of these factors will contribute to the long-term growth of the cybersecurity sector as a whole.
Now, let’s discuss the 3 cybersecurity stocks that investors should not ignore!
Checkpoint (CHKP)
Check Point (NASDAQ:CHKP) is an American-Israeli multinational software and IT security company headquartered in Tel Aviv-Yafo, Israel. The stock is up 18% YTD, and 2024 could be yet another strong year for Check Point.
Over the past few years, the company has exhibited strong financial performance. More particularly, Check Point has showcased its ability to consistently deliver positive FCF from operations. For FY22, they generated 1.07 billion in free cash flow. However, what is more impressive is the company’s gross margins.
Check Point has consistently achieved gross margins in excess of 86% for the last decade. This is well above the industry average, driving higher profitability to the company’s bottom line. Additionally, the company’s AI-powered security platform, XD Horizon XDR/XPR, is well-positioned to gain market share in the AI cloud race.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) stock has lagged behind the cybersecurity sector despite being up 16% in 2023. Wall Street has not been too pleased with its earnings results despite posting strong YOY growth.
Fortinet has consistently delivered high double-digit growth, and its profitability has skyrocketed in the last three years. For FY22, Fortinet’s net income was up 41% YOY to $857.3 million. Net income will likely eclipse $1 billion for the 2023 fiscal year. Even more impressive is that the company has been GAAP profitable every year since its IPO in 2009.
Fortinet is one of the leading network cloud security platforms in the world. What investors should be excited about is their long-term FCF potential. In Q3 2023, Fortinet’s FCF was $481.1 million, compared to $395.2 million in the same quarter last year. Their ability to consistently generate positive FCF yields well for the company’s future acquisitions. As organizations prioritize cybersecurity, Fortinet is one of the best cybersecurity stocks to buy for 2024.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is a leading multinational technology company that is positioning itself in the AI-powered cybersecurity race. In September 2023, Cisco announced its strategic acquisition of Splunk, a leading cloud security platform.
Cisco is much different from other cybersecurity companies because they’re highly diversified. Investors are getting exposure to cybersecurity and benefiting from the growth of network hardware, IoT solutions, and cloud management. Cisco’s robust portfolio places it in an advantageous position to capitalize on the rising demand for cybersecurity solutions.
In Q1 FY24, Cisco delivered its strongest first quarter in the company’s history regarding revenue and profitability. Revenue for the quarter increased 8% YOY to $14.7 billion. GAAP EPS also rose 37% YOY, or $0.89 per share. CEO Scott Herren said, “We delivered revenue and EPS at the high end of guidance, demonstrating strong operating leverage.” This highlights Cisco’s strong execution.
On the date of publication, Terel Miles 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.
