Cybersecurity is a big and growing sector. McKinsey & Co. has forecasted that the global cybersecurity market could reach $2 trillion as companies and individuals increase spending to protect themselves and their data from a rising number of cyberattacks and online threats.
The same report from McKinsey notes that the cost of cyberattacks worldwide is likely to exceed $10 trillion annually by 2025, a 300% increase from 2015 levels.
In this environment, a number of fast-growing cybersecurity firms are focused on protecting both the world’s largest corporations and governments, as well as individuals who work from home. It’s an increasingly crowded space where companies are jockeying for market share and investor capital.
In recent quarters, some clear winners have emerged in the cybersecurity race, producing strong growth rates and earnings and seeing their stocks rise sharply as a result. Here are the three best cybersecurity stocks to buy in Q2 2024.
CrowdStrike Holdings (CRWD)
CrowdStrike Holdings (NASDAQ:CRWD) had arguably the best earnings print for the fourth quarter of 2023, sending its stock up 23% in a single trading session. CRWD stock is now up 133% over the last 12 months, including a 29% year-to-date gain. The leading cybersecurity firm reported earnings per share of 95 cents, compared to 82 cents that was the consensus expectation of analysts.
Revenue in Q4 2023 came in at $845 million versus $839 million that was forecasted on Wall Street. The company noted that its full-year revenue rose 36% from 2022 levels and reached $3 billion for the first time.
As for guidance, CrowdStrike said it expects revenue of $902 million to $906 million in the just-completed first quarter. That was better than an estimate of $899 million among analysts. The company also expects earnings of 89 cents to 90 cents for Q1 2024, ahead of estimates of 82 cents.
In addition to its quarterly results, CrowdStrike announced that it’s acquiring Flow Security for an undisclosed price in a cash-and-stock deal. This continues the company’s strategy of growing through acquisitions.
Palo Alto Networks (PANW)
If CrowdStrike had the best Q4 2023 earnings report, then Palo Alto Networks (NASDAQ:PANW) had the worst. PANW stock plunged 23% and suffered its worst day ever after the cybersecurity firm lowered its full-year guidance for both revenue and billings. However, the guidance was a little misunderstood and overshadowed what was otherwise a great print from Palo Alto Networks.
The company beat Wall Street forecasts on the top and bottom lines, reporting EPS of $1.46 compared to $1.30 that was expected. Revenue came in at $1.98 billion versus $1.97 billion that had been estimated among analysts. Unfortunately, the guidance disappointed. Management said they expect full-year billings of $10.10 billion to $10.20 billion, down from previous guidance of $10.70 billion to $10.80 billion.
The billings outlook missed targets and analysts also expected the company to guide for Q1 2024 revenue of $2.04 billion. But Palo Alto Networks said it foresees revenue of $1.95 billion to $1.98 billion. The company sought to clarify that the lowered guidance was due to a shift in strategy and wanting to accelerate growth in artificial intelligence products. Year-to-date, PANW stock is down 2%. In time, the share price should recover and continue its winning ways. Over five years, the stock is still up 250%.
SentinelOne (S)
Like Palo Alto Networks, cybersecurity firm SentinelOne (NYSE:S) has seen its stock suffer due to forward guidance that underwhelmed analysts. SentinelOne issued financial results that topped consensus forecasts. The company announced an EPS loss of 2 cents, which was better than a loss of 4 cents expected on Wall Street. Revenue for Q4 2023 totaled $174.2 million, up 38% from a year earlier and ahead of an estimate of $169 million.
Sadly, S stock fell 11% on a disappointing outlook. For Q1 2024, SentinelOne forecasted revenue of $181 million, which would be up 36% from a year ago. For all of this year, SentinelOne sees revenue of $812 million to $818 million. While strong, the guidance fell short of the forecasts. The firm cited recent acquisitions as the reason that the guidance didn’t meet Wall Street expectations.
S stock is now down 12% on the year. However, investors shouldn’t worry. Over the last 12 months, SentinelOne’s share price has risen 39%. This cybersecurity stock is still a contender.
On the date of publication, Joel Baglole 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.
