The new digital age for cybersecurity stocks to me is reflective of a number of long-term trends that could reshape the industry. One of the significant trends is the growing usage of artificial intelligence and machine learning in cybersecurity. These technologies are transforming methods of detecting and combating threats through the processing of large amounts of information and the recognition of suspicious patterns. 

Another factor that is likely to create more opportunities and threats is quantum computing. It is believed that quantum will increase encryption and data protection standards through its high computational powers. At the same time, it may also create a threat to the already existing encryption methods and call for the creation of new quantum cryptography methods.

In any case, I think that cybersecurity stocks are undervalued on the whole and that we will see some of them becoming the next big thing on Wall Street within the decade. Here are seven cyber security stocks that investors should keep in mind.

Zscaler (ZS)

The bull case for Zscaler (NASDAQ:ZS) is based on the company’s market leadership and excellent financial results even in an economic slowdown. Being one of the leading companies in the emerging zero trust network security market, Zscaler is ready to benefit from the trends of cloud computing and digital transformation. 

Zscaler’s cloud-based solutions such as its Zscaler Internet Access and Zscaler Private Access solutions have contributed to strong revenue growth. The company posted a 32% increase in revenue from the previous year in the last quarter. Furthermore, Zscaler has posted its first quarter of positive GAAP net income. This is always a good sign for the company that is on the path towards becoming profitable. 

Zero-trust networks are the newest paradigm in cybersecurity, and I think that ZS stock is well positioned to be one of those cybersecurity stocks to take full advantage of it. It currently trades at just 12x sales, which is relatively cheap compared to some of its peers.

Palo Alto Networks (PANW)

Palo Alto Networks (NYSE:PANW) is in a good position to capture more market share from the customers. Especially those who are in search of an integrated and comprehensive security solution following the CrowdStrike (NASDAQ:CRWD) outage. Both companies are close competitors.

Aside from this short-term catalyst for PANW, I also think the market’s concerns about Palo Alto Networks’ deferred growth may be shortsighted. With customer contract durations averaging around 3 years, the company is positioned to benefit from upcoming contract renewals and renegotiations, which could significantly improve its base of recurring revenue moving forward. 

PANW is one of those cybersecurity stocks that investors should consider if they value solid earnings growth potential. It trades at 53x times forward earnings, and I believe that these earnings are fairly priced. Meanwhile, it also leaves substantial upside on the table for those who get in early.

Fortinet (FTNT)

Fortinet’s (NASDAQ:FTNT) competitive strengths are based on its Unified SASE architecture where it places its networking and security solutions on the same operating system, FortiOS. This integrated approach enables Fortinet to present the customers with a strong vendor consolidation strategy, given the customers’ desire to address their IT budget and security requirements. 

Also, Fortinet has a very good business model delivering gross margins of over 75% and net margins of over 20%. Based on the factors discussed above, Fortinet is a good investment prospect. But, I think that the best has yet to come for the company.

Analysts expect low double-digit EPS growth for the company over the next five years, while revenue could double by 2028. I think it’s reasonable to expect that these numbers are realistic and reasonable given how crucial cybersecurity is for companies large and small.

Rapid7 (RPD)

Rapid7 (NASDAQ:RPD) has also seen the benefit of using an integrated business model in terms of customer retention and its expansion of annualized recurring revenue (ARR). The company’s ARR per customer has been growing at a CAGR of 13% over the last five years, and I think that this is a trend that will hold steady in the future.

I believe that RPD will continue its strong CAGR growth as it has been able to maintain its market leadership position through continual innovation. The company has consistently been named a leader in various Gartner Magic Quadrant reports, which forms a protective moat around its outlook and future earnings.

For value investors, RPD could also be seen as a relative bargain. It trades at just 16x forward sales, which is considerably lower than many of its peers. However, it comes with a caveat that its earnings growth is expected to be substantially lower.

Cloudflare (NET)

Cloudflare (NYSE:NET) has remained one of my favorites amongst cybersecurity stocks that investors should have on their buy lists. The bull case for Cloudflare focused on the company’s competitive advantages and the growth opportunities in the near future, especially in the AI market. 

78 percent of the top 50 generative AI web products are currently using its services; this speaks to the company’s ability to seize a sizable portion of this fast-growing market. More so, Cloudflare has a positive net cash position and generates positive free cash flows, positioning the company to invest in product development and expansion. 

I think that NET is a sleeping dragon given how interconnected its services are with the web’s general infrastructure. Its content delivery network powers around 10% of all websites globally and 17% of the Fortune 1000.

This massive base of customers allows for deep account penetration into additional product lines such as zero-trust services and preserves customer loyalty.

Akamai Technologies (AKAM)

Akamai Technologies’ (NASDAQ:AKAM) security segment has been a bright spot, growing 21% year-over-year in the most recent quarter. The company’s recent acquisitions, such as Guardicore and Noname Security, have bolstered its security offerings and API security capabilities. These are all vital for boosting AKAM’s long-term growth and valuation.

Furthermore, Akamai has a track record of consistently beating earnings expectations and investing in growth areas like security and computing. These moves provide a foundation for future success. I think that AKAM could be one of those cybersecurity stocks for investors who want shares of a mid-cap stock. Both in terms of market capitalization as well as the strength and quality of revenue.

AKAM has a market cap of $14.4 billion while it trades at 14x forward earnings. To me, it strikes a midpoint of capitalization and upside potential. Which could make it a good play for investors seeking to capitalize on a mix of both.

F5 Networks (FFIV)

F5 Networks’ (NASDAQ:FFIV) focus on multi-cloud application security and delivery solutions is resonating with customers. This is leading to mid-to-high single-digit revenue growth forecasts for fiscal 2025.

However, that’s far from where the story ends for FFIV stock. The company has no debt and plenty of cash on its balance sheet to invest for future growth. Its true that FFIV has faced some pressure in its hardware sales segment. However, I think that focusing on this misses the bigger picture. Its higher-margin subscription offerings more than made up its weaknesses, and I think that’s where the company is ultimately headed towards.

FFIV is another one of those mid-cap stocks, along with most of the industry. It then speaks volumes that some of these firms are on their way to becoming large-cap giants. And, I think that FFIV’s focus on its core subscription revenue gives it a solid chance to get there.

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.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.