Our partner, XM, lets you access a free demo account to apply your knowledge.
No hidden costs, no tricks.
The rapid digitalization of products and services around the world has exponentially increased the risks of malicious attacks on sensitive data. Individuals, organizations, governments, and everyone in between is, or has been, at risk of losing valuable data at the hands of hackers and malware. As technology progresses, so does the ability of hackers to gain access to sensitive information, which drives up the demand for secure and reliable software and hardware system solutions to keep this information well beyond their reach. This has heightened the discussions regarding cybersecurity stocks and their importance within the global economy even further. Investors have been betting big on cybersecurity stocks, as their importance is easy to see and the growth potential for the industry is huge. By some estimates, the global cybersecurity market is set to surpass $0.5 trillion by the year 2030, which has signaled investors to act quickly to capitalize on this growth in the long run.
In this investfox article, we will look at six cybersecurity stocks that might be attractive for long-term investors and overview their financial and stock performance in the past to highlight their potential for becoming world-beaters in this field throughout the coming years.
Before diving deeper into individual cybersecurity stocks, it is important to first highlight some key reasons for investors to choose the cybersecurity industry as the prime destination for their capital:
CrowdStrike Holdings is an American cybersecurity company that specializes in cloud-delivered endpoint and workload protection. The company’s main product is called Falcon, which delivered a range of cybersecurity services, including:
CrowdStrike offers its services around the world, with clients in over 170 countries worldwide. CrowdStrike has become a major player in the cybersecurity industry over the years - uncovering some high-profile attacks, such as the DNC hack of 2016, and the SolarWinds cyber attack in 2020.
"The great thing about our Falcon platform is that we cater to the largest enterprise all the way down to the smallest SMB businesses and because it's a SAS service it's the same technology and it protects the largest organizations to the smallest little companies"- George Kurtz
CrowdStrike has a strong, well-established customer base and a variety of cybersecurity services, which include threat detection, machine learning, and rapid incident response.
CrowdStrikes’ 4Q earnings report from the fiscal year 2023 highlights some important milestones from the quarter:
In terms of stock performance, CrowdStrike has had a difficult time throughout 2022. The bear market caused a mass sell-off in the stock market, which more than halved CrowdStrike’s market capitalization. However, the start of 2023 marked a turnaround, as the Federal Reserve started to ease interest rate hikes and the market began a rebound.
Fortinet is a multinational cybersecurity company that offers its services to organizations of various sizes and profiles. Fortinet’s main service is the FortiGate platform, which offers firewall and VPN solutions, such as cloud security, endpoint security, and intrusion prevention.
Fortinet’s Security Fabric architecture allows the company to integrate its products with other third-party software to help manage its security infrastructure.
Fortinet has customers in over 190 countries worldwide, which includes companies from the healthcare, finance, and education industries, as well as government agencies.
"So that's making security always keep working faster than the network in the IT spending and the security becomes the biggest sector in the IT spending environment"- Ken Xie
Fortinet’s Q4 results highlight some important operational results from 2022, including:
Fortinet has returned more than $2 billion to shareholders via share repurchases over the past year. With a diversified business model, Fortinet is projected to reach a 22% compound annual growth rate over the next three years. Its diverse suite of security solutions and threat-detection capabilities make Fortinet one of the most exciting cybersecurity stocks to watch in the coming years.
Fortinet’s stock has been quite volatile over the past year, with frequent dramatic swings in either direction. While this volatility might deter some investors from buying the stock, it also means that patient investors can wait for the stock to drop and buy at a more favorable price. The stock has gained roughly 4.5% in market value year-to-date, but could drop lower in 2023 - opening new opportunities for investors to buy up the stock.
Okta is a cloud-based identity and access management company that works with a wide range of organizations to help securely manage access to their data, applications, and other critical information.
Okta’s subscription-based software-as-a-service (SaaS) model provides subscription plans for IAM solutions, support, and maintenance.
Okta also offers a range of other cybersecurity services, such as:
While Okta remains unprofitable, the Q4 2023 report did highlight some operational milestones reached by the company during the quarter:
Some investors may be reluctant to buy Okta stock at current valuations, given that the company is still operating at substantial losses. However, the bottom line shows signs of improvement, as Okta has managed to narrow its loss by over 35% this quarter.
"Okta as an identity company, we sit between employees and customers and all the digital technology they use at work or in their personal lives, so we gather unique insight about who's using what and what trends are shaping the technology industry" - Todd McKinnon
This unprofitability makes Okta a volatile stock in the short term. As the company’s stock performance over the past 12 months has shown, Okta is somewhat overvalued. If Okta drops lower in 2023, this could be a good time for investors to buy the stock and hold it in long-term portfolios.
Global X Cybersecurity ETF is an exchange-traded fund issued by Mirae Asset Global Investments Co. Ltd that invests in a broad range of cybersecurity companies from developed markets around the world. The ETF has a 0.50% expense ratio and over $700 million in assets under management.
Some of BUG’s largest holdings include:
The ETF is primarily invested in Nasdaq-listed cybersecurity stocks and presents a diversified opportunity for investors to gain exposure to the cybersecurity industry without committing their funds to any single stock. The ETF is a great indicator of the overall trends present in the cybersecurity market and a convenient way to diversify otherwise conservative portfolios.
2022 was a difficult year for most high-growth industries and cybersecurity was no different. BUG has lost around 25% In market value over the past 12 months and still remains relatively affordable for new cybersecurity bulls to enter the market and invest in the fund.
Zscaler is a cloud-based cybersecurity company that protects users and their data from viruses, malware, and phishing attacks. Some of Zscaler’s services include firewalls, cloud sandboxing, secure web gateways, data loss prevention, and cloud access security broker solutions.
Zscaler offers its solutions through subscription-based software-as-a-service, which customers pay for on a monthly, or annual basis. Since Zscaler’s services are delivered through a global cloud infrastructure, clients can access it from anywhere in the world.
Zscaler’s customers include government agencies, small and medium-sized enterprises, etc.
Zscaler’s latest quarterly report released in January has shown some major improvements in the company’s bottom line, including:
Zscaler is a company that still operates at a loss. This is one of the reasons behind the high degree of volatility experienced by the stock over the past 12 months. Zscaler’s stock has lost over 45% over the same period. The high-interest rates and a slowing economy could dip the stock even lower in 2023, which could be a welcome opportunity for new investors with above-average risk tolerance. While investing in unprofitable stocks always carries an outsized risk, Zscaler is a growing company with plenty of long-term potentials, which should be appealing to many investors.
"All bad things come from the internet, all good things leave to the internet. So we are the checkpost to make sure the right party talks to the right party from a cyber point of view " - Jay Chaudhry
Palantir is one of the largest and most well-known cybersecurity companies in the world, which provides a broad range of software and data analytics solutions to its clients.
Palantir primarily sells its services to large enterprises. Palantir’s flagship product, the Palantir Gotham software platform, enables users to analyze and visualize large amounts of data from a variety of sources, while also providing tools for data integration, management, and analytics.
Palantir has long-term contracts with its relatively small customer base, which includes government agencies and large businesses. Recently, Palantir has been actively seeking new partnerships with other technology companies to expand its offerings to include more security services for commercial use.
Palantir Technologies’ earnings report from Q4 2022 shows some highlights of the company’s operational side:
Palntir’s stock has also been subject to high volatility in 2022. The stock has lost 35% of its market value over the past 12 months and now trades below the $8 mark. Considering the high amount of traction Palantir attracts from the investing community, lower valuations represent attractive buying opportunities for investors with an appetite for risk.
"You want to be in an environment where your values win, and you know how you can do that, you build a software company and you get people like in this room to implement the software, and you say, "hey, I know I'm not likable, but the software is going to bring you alive home", and your values are going to win" - Alex Karp
Cybersecurity stocks can be a solid investment in the long run. Investors with a decent risk tolerance can expect to accrue a lot of value over the next decade, as the industry is set to surpass $500 billion by 2030.
Cybersecurity stocks have opened the year with steady gains. However, analysts are skeptical about the markets in 2023, which could mean that more cybersecurity stocks will trade at lower valuations in 2023.
Palantir Technologies and CrowdStrike Holdings are largely regarded as two of the most important players in the cybersecurity market. Both companies are profitable and offer a diverse suite of services for commercial use, which makes them suitable candidates for long-term technology-oriented investment portfolios.