These cybersecurity companies are struggling names in the industry, and holding onto them could cause investors significant losses. The astronomical growth of cybercrime worldwide is predicted to reach over 20 trillion U.S dollars by 2026. Yet, the brands have failed to capitalize on this.
The following cybersecurity stocks to sell are struggling with cash flow problems, as well as an increasingly cutthroat competitive environment. It might be safer for investors to put their money into a broad-based index like the Nasdaq.
So, let’s dig deeper into the three cybersecurity stocks to sell this month.
CrowdStrike (CRWD)
CrowdStrike (NASDAQ:CRWD) is a provider of cloud-delivered endpoint and cloud workload protection. Its main operating segments can be found in cloud security, enterprise security, and subscription services.
CRWD is in an interesting position. The company’s stock price surged 186.43% over the past year. This was in direct response to the AI revolution and the overall rally for tech stocks in the Nasdaq. Its top line is also swelling, growing 35.31% last quarter year over year (YOY) to 786.01 million.
CRWD’s issue comes down to the expense of its free cash flow relative to its stock price. Namely, its price-to-free-cash-flow ratio is a huge 89.08 at the time of writing. Paying $89 for a single dollar of its free cash flow is far above the median of its peers and is also expensive on its own.
And, Wall Street considers the stock overvalued according to their forecasts. In fact, analysts are pricing in a 23.84% discount within the next twelve months. Additionally, the company has negative GAAP accounting profits. Yet, this is set to turn positive within the next twelve months. It’s expected to trade at 95 times earnings. By contrast, Nvidia’s (NASDAQ:NVDA) forward P/E is just 40.
It’s time for investors to take profit from CrowdStrike. Holding it poses too much risk given the expensive cost of its shares.
Palo Alto Networks (PANW)
Palo Alto Networks (NYSE:PANW) trades at 210x trailing earnings. Also, its Relative Strength Index (RSI) on the long-term charts is 74.30, which is in overbought territory.
I don’t think PANW’s future earning projections warrant such a high valuation. For instance, the forecast for next year puts its EPS growth at 17.15% to 6.58. For investors to feel comfortable paying $210 for a single dollar of its earnings, that figure would need to be equally astronomical. And right now, it’s not much better than its peer companies.
Also, Wall Street believes PANW could be overvalued, as there’s a 21.33% correction for its stock price in store for it to be realized over the next twelve months.
Boeing (BA)
Anyone who has been watching the news recently understands that Boeing (NYSE:BA) has had a PR disaster on its hands. Last week’s recent reports reveal it has been “cutting corners” on its manufacturing processes.
I feel that the concerns around BA stock’s reputation for aircraft could also hurt its Defense, Space & Security operating segment. Credibility is of utmost importance, especially given the nature of BA stock’s security contracts with the Department of Defense and intelligence communities.
Additionally, the company’s negative EPS and net income don’t help its case either. There have also been a series of downgrades for its forecasted stock price in January, including from Wells Fargo and Bank of America Securities. Both analysts predict that its stock price will reach $225 within the next twelve months, representing a very modest upside for the company.
I think that the worst has yet to come for BA stock, and therefore recommend investors consider it one of those cybersecurity stocks to sell.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
