by Fred Fuld III
In an increasingly digital world, cybersecurity is more crucial than ever. High-profile cyberattacks have exposed vulnerabilities in businesses, government agencies, and even critical infrastructure. Recent breaches, such as the attack on MGM Resorts, which caused widespread operational disruptions, and the cyberattack on software provider Progress Software’s MOVEit file transfer tool, which affected thousands of companies worldwide, highlight the growing threats organizations face. Yale New Haven Health was hit recently, along with the city of Mission in Texas.
As cyber threats continue to evolve, companies specializing in cybersecurity have become indispensable, making cybersecurity stocks an attractive investment opportunity.
The demand for cybersecurity solutions is skyrocketing as businesses move their operations online and store sensitive data in the cloud. With artificial intelligence (AI) making cyberattacks more sophisticated, companies must constantly upgrade their security measures. This ongoing demand ensures that cybersecurity firms have strong growth potential, which is reflected in the stock performance of leading companies in the sector.
Several cybersecurity stocks have experienced a huge drop in the last three or four months, creating a potential buying opportunity at more favorable prices.
Among the top cybersecurity stocks worth considering, Okta (OKTA) stands out for its expertise in identity and access management. As more businesses shift to remote work, Okta’s services ensure that only authorized users can access company networks, making it a critical security player.
This $19.5 billion market cap company has a nosebleed high trailing price to earnings ratio of almost 2000, however, the forward P/E is much more favorable at 32. Earnings per share growth year-over-year were up 107%, on a sales growth of 15.3%. Earnings per share are expected to grow another 10.3% next year.
Datadog (DDOG) specializes in monitoring and analytics for cloud environments. Its platform provides real-time insights into security threats, helping organizations detect and respond to attacks quickly. As cloud adoption accelerates, Datadog’s security capabilities make it an essential tool for businesses.
This is a $35 billion market cap company that trades at 198 times trailing earnings and 48 times forward earnings. Earnings per share growth year-over-year were up 274%, on a sales growth of 26%. Earnings per share are expected to grow another 23% next year.
Akamai Technologies (AKAM) is a leader in content delivery and cloud security. Its services help protect websites and applications from cyber threats, including distributed denial-of-service (DDoS) attacks. Given the increase in cyberattacks on web applications, Akamai’s security solutions are in high demand.
Akamai has a market cap of $12 billion. It trades at 25 times trailing earnings and 12 times forward earnings. Earnings per share year-over-year were down, on a sales growth of 4.7%.
Rapid7 (RPD) provides vulnerability management and security analytics to help companies identify weaknesses in their systems before hackers can exploit them. With the rise of ransomware and zero-day vulnerabilities, Rapid7’s proactive security approach is essential for businesses looking to stay ahead of threats.
This is a $1.79 billion market cap company with a trailing P/E of 70 and a forward P/E of 14. Earning per share are expected to grow by 9.3% next year.
Because of the demand, the cybersecurity field is becoming crowded with many publicly created companies to choose from, including Palo Alto Networks (PANW), SentinelOne (S), Sailpoint (SAIL), Qualys (QLYS), Zscaler (ZS), Elastic (ESTC), Tenable (TENB), Check Point Software (CHKP), Fortinet (FTNT), and many, many more.
With cyberattacks becoming more frequent and severe, businesses and governments have no choice but to invest heavily in cybersecurity. This necessity creates a strong, long-term growth outlook for cybersecurity companies. For investors looking to capitalize on this trend, cybersecurity stocks may offer a compelling opportunity for solid returns.
Disclosure: The author didn’t own any of the above at the time the article was written.
