The 7 Hottest Cybersecurity Stocks to Own for 2023 and Beyond
It’s only a matter of time before we’re hit by another massive cyberattack, and that’s why we’re looking at some of the hottest cybersecurity stocks to own today.
Right now, cities, hospitals, schools, businesses, small businesses, and even US government agencies are all vulnerable. Even your information is not safe. Your most personal information, bank details, social security numbers and information about your children. And just in case you think hackers can’t reach you, it’s happened before. Worse still, according to Cybersecurity Ventures, the global costs of cybercrime will increase by around 15% per year, reaching $10.5 trillion by 2025 (up from $3 trillion in 2015). That alone is reason enough for investors to look into some of the hottest cybersecurity stocks on the market.
Yet none of us are prepared at all. “The costs of cybercrime include damage and destruction of data, theft of money, loss of productivity, theft of intellectual property, theft of personal and financial data, embezzlement, fraud, disruption normal course of business after an attack, forensic investigation, restoration and removal of compromised data and systems, and reputational damage,” said Steve Morgan, Founder of Cybersecurity Ventures.
Currently, according to Forbes, about 41% of security leaders in a survey by ThoughtLab don’t think their organizations are prepared. In another global study, 82% of CIOs said their software supply chains were vulnerable. Unfortunately, the world may never be fully prepared. However, until the world finally wakes up, we can at least enjoy the story.
|THUMBTACK||Global X Cybersecurity ETF||$22.85|
|TO HACK||ETFMG Prime Cyber Security ETF||$46.23|
|PANW||Palo Alto Networks||$161.78|
ETF Global X Cybersecurity (BUG)
One of the best ways to trade a hot industry is with an exchange-traded fund (ETF), such as the Global X Cybersecurity ETF (NASDAQ:THUMBTACK). BUG not only offers greater diversification, but it does so at a lower cost. With an expense ratio of 0.50%, the BUG ETF offers exposure to 27 stocks, which will benefit from the adoption of cybersecurity adoption.
Some of its top holdings include Fortinet (NASDAQ:FTNT), Palo Alto (NASDAQ:PANW), Checkpoint Software (NASDAQ:CHKP), Okta (NASDAQ:OKTA) and Quick7 (NASDAQ:RPS) to only cite a few. With BUG, I can buy 100 shares for $2,285 right now and get massive exposure to those names. Or, I can buy 100 shares of, say, PANW, and pay a little over $16,000 for the same amount of a share. In short, ETFs make sense.
PureFunds ISE Cybersecurity ETF (HACK)
Another strong and oversold cyber security ETF to consider is the PureFunds ISE Cybersecurity ETF (NYSE:TO HACK). With an expense ratio of 0.60%, this ETF invests in cybersecurity solutions that include hardware, software, and services. Some of its top holdings include BAE systems (OTCMKTS:BAESY), Leidos Holdings (NYSE:LDOS), VeriSign (NASDAQ:VRSN), Cisco (NASDAQ:CSCO), Fortinet, Check Point software and Splunk (NASDAQ:SPLK). While the HACK ETF didn’t have an impressive outing in 2022, most other stocks didn’t either. Moreover, with a growing and unstoppable cybersecurity threat, the demand will only increase the revenue.
Palo Alto Networks (PANW)
Palo Alto Networks is the crème de la crème of the best cybersecurity stocks to buy. With strong demand, the company continues to generate strong earnings. In the first quarter, the company beat earnings and sales, then raised its full-year guidance.
Revenue increased 25% year over year to $1.56 billion, which was above the company’s guidance range of $1.535 billion to $1.555 billion. Non-GAAP earnings were $266.4 million, or 83 cents per share, versus $170.3 million, or 55 cents, year-over-year. For the year, PANW now expects sales to fall to a range of $6.85 billion to $6.91 billion, which is slightly up from its previous sales forecast range. from $6.85 billion to $6.9 billion. Growth was driven by growing customer engagements with enterprise platforms.
Evercore ISI analysts just raised its price target on PANW to $215 from $207, with an outperform rating. BMO Capital has also just raised its target from $218 to $225, with an outperform rating for the stock as well.
Investors should also take a look at Crowd (NASDAQ:CRWD). Over the past few weeks, the company has moved from around $140 to $115, where it appears to have found strong support. While the company reported annual recurring revenue of $2.34 billion, up 54% year-over-year, CEO George Kurtz said that was below expectations. A year earlier, this turnover had increased by 67%. In the third quarter, the company also said it added 1,460 net subscriber customers, up from 1,607 a year earlier.
However, even if the numbers weren’t up to snuff, analysts at Morgan Stanley believe the pullback is a buying opportunity. “With forward estimates properly set, we believe this pullback provides an attractive entry point to accumulate equity in a leading SaaS security franchise,” the company said, as quoted by CNBC.
Daiwa Capital Markets analyst Stephen Bersey also upgraded CRWD to a buy rating with a price target of $181 per share. The analyst appreciated quarterly results and cost control.
With a market cap of $24.4 billion, Datadog (NASDAQ:DDOG) didn’t have a good year either. Again, many companies have not. 2022 was a year-long train wreck. However, I would use DDOG’s weakness as a buying opportunity, especially since it is a leader in the $62 billion “observability” market.
After all, observability is essential. It helps provide businesses with insight into metrics, traces, and logs. It can also help determine when an attack happened, understand what attackers did inside the company, and improve security in the future.
Even better, billionaires are investing in DDOG. Stanley Druckenmiller, for example, has bought about 790,000 shares over the past few months. Jim Simons’ Renaissance Technologies also purchased about 331,000 shares. All of this is happening as the company continues to grow. In the third quarter, DDOG posted 61% year-over-year revenue growth to $437 million. Even its net loss has improved, to a loss of $14 million from $40 million last year. Additionally, the company has a net retention rate of over 130%, which is unheard of among software vendors.
Fortinet is another of the big players in cybersecurity, with strong growth. In the company’s third quarter, revenue grew 33% year over year to $1.15 billion. All thanks to a 39% increase in product sales and a 28% increase in service revenue. EPS rose 65% to 33 cents, while cash flow climbed 20% to $395 million.
There’s a lot more to like about FTNT here. For example, once FTNT software is installed, customers will continue to pay for ongoing software and services. The company has also invested in protecting employee endpoints, which is essential for remote employees.
Although the company forecast $1.69 billion in billings, which is in the middle of its forecast, it was below Street’s expectations for $1.74 billion. Although negative, billings are on track to jump about 30% year over year, which is still very healthy.
SentinelOne (NYSE:S) is another cybersecurity stock to buy and hold. It uses artificial intelligence through its Singularity platform to offer protection to its customers. According to the company, the platform provides the speed and assessment needed to fend off modern cyber threats, which continue to evolve.
Best of all, earnings and guidance are solid. In the third quarter, adjusted EPS fell 16 cents on sales of $115.32 million. That was far better than expecting a 25-cent loss on sales of $95.7 million. This unexpected profit was generated by a 106% increase in revenue, which was fueled by the adoption of the company’s cloud offerings. For the fourth quarter of 2022, the company expects revenue of approximately $125 million. He also expects annual revenue to be between $420 million and $421 million, down from $416 million.
At the date of publication, Ian Cooper had (neither directly nor indirectly) any position in the securities mentioned. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.