An ever-growing cyber threat is one of the biggest challenges for businesses and individuals. In a dynamic world of technology, progress is not always in a positive direction. For example, “another surge in cyber threats may be coming because GenAI can help create advanced business email compromise at scale.”
Therefore, every new technological development has its pros and cons. The global surge in cyber threats for corporate and government organizations implies a big opportunity for cybersecurity companies. As the addressable market swells, there are potential multibagger cybersecurity stocks to buy.
To put things into perspective, the global cybersecurity market is expected to be worth $501.6 billion by 2030. This will likely translate into sustained growth for some of the best cybersecurity companies. This column discusses three multibagger cybersecurity stocks to buy for massive value creation.
Let’s discuss the reasons for being bullish on these likely value creators.
CrowdStrike Holdings (CRWD)
Even after a rally of 120% in the last 12 months, CrowdStrike (NASDAQ:CRWD) is among the best cybersecurity stocks to buy. Of course, I would go slow and look at accumulating on dips. However, there is no doubt that CRWD stock will likely deliver multibagger returns in the next five years.
As an overview, CrowdStrike provides cloud-delivered protection of endpoints, cloud workloads, identity and data. Regarding the market potential, CrowdStrike believes the total addressable market will be worth $100 billion in 2024. Further, the company’s “AI-Native Security Platform” market size is expected to surge to $225 billion by 2028. This provides ample headroom for growth.
From a financial perspective, CrowdStrike ended FY24 with a total revenue of $3 billion. For the same period, the free cash flow was $938 million. Robust FCF provides flexibility in investing in the AI-enabled Falcon platform to make it the best comprehensive security solution.
Cloudflare (NET)
Cloudflare (NYSE:NET) provides integrated cloud-based security solutions. These solutions are for platforms that include public cloud, private cloud, on-premise, software-as-a-service applications and IoT devices. NET stock has witnessed a healthy rally of almost 45% in the last six months. I remain bullish on further upside considering the business momentum.
Earlier this month, Cloudflare announced the acquisition of Baseline, a cloud-native observability platform. This will be integrated into Cloudflare’s developer platform, expanding the range of services provided to developers.
Regarding the scale of operations, the company claims to be blocking 182 billion cyber threats daily. Further, the addressable market is significant, with 46% of revenue being spent outside the United States. To put things into perspective, the addressable market will likely expand to $204 billion by 2026. This provides ample headroom for growth.
An important point to note is that the company’s operating margin was negative in 2021. Margin expanded to 4% in 2022 and 9% last year. With stellar growth, Cloudflare is positioned for healthy operating and free cash flows.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) stock has been sideways in the last 12 months. At a forward price-earnings ratio of 37, FTNT stock looks attractive from a valuation perspective compared to the other stocks discussed. I expect a strong breakout on the upside in the coming quarters.
Fortinet is a cybersecurity provider and convergence of networking and security solutions globally. As of 2024, Fortinet estimated a total addressable market of $150 billion for secure networking and security operations. The addressable market is likely to expand to $208 billion by 2027.
An important point to note is that Fortinet has a solid customer base with over 730,000 enterprises, service providers and government organizations. Further, the company is well diversified with a presence in more than 100 countries.
Fortinet has guided revenue of $5.8 billion for the current year. Last year, the company’s adjusted free cash flow was $1.9 billion. Therefore, there is ample flexibility to invest in innovation-driven growth.
On the date of publication, Faisal Humayun did not hold (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.
