The cybersecurity industry offers a long-term opportunity for investors. It’s projected to maintain a 12.3% annualized growth rate from now until 2030. Many cybersecurity firms are positioned to attract more clients and raise their prices over time. However, some cybersecurity stocks will do better than others.
Investors should look for firms that have competitive advantages, strong financial growth and long-term growth prospects. Some cybersecurity firms have reported meaningful revenue deceleration, but the ones that continue to grow offer a significant opportunity for patient investors.
Crowdstrike (CRWD)
Crowdstrike (NASDAQ:CRWD) is the best pure-play cybersecurity stock. The corporation doesn’t have much to its business model outside of cybersecurity. However, it’s become a juggernaut in the industry while delivering incredible returns for shareholders.
Shares are up by 30% year-to-date (YTD) and have quintupled over the past five years. The Falcon Platform offers $3.44 billion in annual recurring revenue. That steady revenue was a part of the firm’s $845.3 million in Q4 of 2024 revenue, marking a 33% year-over-year (YOY) increase.
Unlike most cybersecurity firms, Crowdstrike has continued to maintain strong revenue growth. However, investors have been getting just as excited about its profits. The cybersecurity giant reported $53.7 million in GAAP net income compared to a net loss of $47.5 million in the same period last year.
The stock is a bit pricy at an 81 forward P/E ratio, but that’s not stopping analysts from appreciating the big picture. The stock is rated as a strong buy among 37 analysts and has a projected 24% upside from current levels.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) dominates in numerous industries, including cybersecurity. The tech firm works with policymakers and corporations to keep sensitive information safe. It’s also making cybersecurity more accessible to small businesses through Copilot for Security. Customers can use this platform’s AI features to detect and address threats before they become major problems.
Businesses need protection, but they also need a place where they can safely store digital files. Microsoft Azure, the second-largest cloud computing provider in the industry, has been a useful resource for many businesses. Cloud revenue has become a sizable portion of Microsoft’s business. It represented more than half of Microsoft’s Q3 of 2024 revenue and grew by 23% YOY. Microsoft’s overall revenue jumped by 17% YOY. Net income was up by 20% YOY.
Analysts have been rushing to assign higher price targets for Microsoft, with the highest price target currently standing at $600 per share. The average price target suggests an 18% upside for the tech conglomerate. Analysts have rated the stock as a strong buy.
Alphabet (GOOG,GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is mostly known for its search engine. But Google Cloud is helping the company gain market share in the cybersecurity industry. The company’s cloud computing platform protects digital assets, and it’s growing faster than Microsoft.
Google Cloud generated $9.57 billion in Q1 of 2024, which was 28.4% higher than the same period last year. Also, profit margins are expanding. Q1 of 2023 operating income landed at $191 million while this figure jumped to $900 million in Q1 of 2024.
Analysts have rated the stock as a strong buy and believe it can gain an additional 13% from current levels. Alphabet’s highest price target of $225 per share suggests a 33% upside. While long-term investors want more gains, many of them have been pleased with the company’s recent growth. The tech giant’s shares are up by 22% YTD and have almost tripled over the past five years.
On this date of publication, Marc Guberti held long positions in MSFT and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
