Cybersecurity is a hot industry that is expected to grow at a compound annual growth rate of 12.7% from now until 2030. Some leaders in the space have slowed down which creates a promising opportunity for the firms that are still exhibiting high growth rates.
Businesses will always need cybersecurity since hacking is a lucrative industry. Cyber criminals can make a lot of money by selling sensitive data on the dark web or stealing a company’s resources. The presence of hackers requires a solution, and that can translate into big gains for these cybersecurity stocks.
Crowdstrike (CRWD)
Crowdstrike (NASDAQ:CRWD) has established itself as one of the top cybersecurity stocks. While many firms have reported decelerating growth rates in recent quarters, Crowdstrike continues to deliver. The firm generates more than $3 billion in annual recurring revenue and closed the fourth quarter of fiscal 2024 with 32% year-over-year revenue growth.
CEO and co-founder George Kurtz explained in the press release why more businesses are turning to Crowdstrike.
“Customers favor our single platform approach, standardizing on CrowdStrike for cloud security, identity protection, and LogScale next-gen SIEM solutions, together representing more than $850 million of ending ARR. CrowdStrike is cybersecurity’s consolidator of choice, innovator of choice, and platform of choice to stop breaches.”
It’s also been a great company for investors. The stock is up by 137% over the past year and has gained 392% over the past five years. Analysts are projecting an impressive 25% upside at current levels. The stock is rated as a “Strong Buy” with 39 “Buy” ratings and two “Hold” ratings.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) has been hit hard by headwinds but has a reputation for delivering high profit margins and growth rates. Fortinet is for patient investors who are willing to wait and see. The stock is currently rated as a “Hold” with 22 “Hold” ratings, 10 “Buy” ratings, and two “Sell” ratings. The stock has an implied 12% upside based on the price targets from 34 analysts.
The recent slowdown has resulted in a 46 P/E ratio which is lower than most cybersecurity stocks. Shares are only up by 8% over the past year, but the stock’s 5-year gain of 291% demonstrates the juggernaut this stock can become once it navigates current headwinds.
Investors looking for value in a pure cybersecurity firm may want to consider this pick. Momentum can carry stocks like Crowdstrike above it, but the stock offers a better margin of safety. Granted, it is very hard to find pure cybersecurity stocks that present any significant margin of safety.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is a leader in several promising industries like artificial intelligence, cloud computing, and gaming. Microsoft Cloud is the main catalyst for revenue growth, and many firms use this technology to keep their information safe.
Microsoft Cloud revenue was up by 18% year-over-year while net income jumped by 33% year-over-year in the second quarter of fiscal 2024. The company is applying artificial intelligence at scale to introduce new products like Copilot and strengthen its existing products.
Microsoft has been a leader in the artificial intelligence race since its big investment in OpenAI. That lead helped Microsoft announce a new product launch that can make it the go-to cybersecurity resource for businesses.
The corporation’s upcoming Copilot for Security offers pay-as-you-go cybersecurity. Price is a common barrier to entry that prevents small businesses from getting optimal protection. Microsoft addresses this issue by making advanced tools readily available for smaller companies. Big organizations can also benefit from Copilot for Security. Microsoft’s latest innovation launches on April 1, 2024.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
