Best Cybersecurity Stocks: 4 Stocks to Buy in March
March 8, 2022
Remember the TV show Mr. Robot, in which hackers teamed up in an attempt to free the world of evil corporations?
Well, in reality, hackers tend not to be so benign. Most criminal cyber activity targets companies. But individuals can fall victim too.
In recent years, there have been cyberattacks on hospitals and schools, as well as on banks and even energy pipelines. On average, hackers cost victims about $40,000 per hour. And they end up causing nearly half a million people in the U.S. to lose their jobs each year.
The threat of ransomware and other attacks has grown since the COVID pandemic, when a growing number of employees began working from home.
In addition, Russia, which has apparently allowed or even sponsored cyberattacks on the U.S. and Europe, is expected to step up its hacking activity in the wake of its invasion of Ukraine.
With cyberthreats on the rise, it looks like a great time to invest in companies that work to thwart online criminals. Overall, the cybersecurity market is expected to generate $146 billion annual revenue in 2022 and as much as $211 billion in 2026.
Here are four stocks worth checking out.
Cloudflare (NET) is a web infrastructure and security company based in San Francisco. Its main product is the Cloudflare network, which manages and protects data and code for companies around the world.
One of the main goals of the Cloudflare platform is to prevent the kind of cyberattacks that easily affect companies and institutions that operate on their own servers.
Recently, Cloudflare spent $162 million to acquire Area 1 Security Inc. This company specializes in combating socially engineered cyberattacks and provides cloud email security.
Area 1 reports that it is 30% more efficient at preventing email phishing attacks than other methods, such as email gateways and cloud email suites. Its services also thwart malware and ransomware attacks by eliminating them before they start causing damage.
In full-year 2021, Cloudflare grew revenue 52%, to $656.4 million. The company also grew its comfortable cash pile to $1.82 billion. Like many tech companies, Cloudflare hasn’t been profitable yet. It’s using its money to develop products and make strategic additions, like the Area 1 purchase.
However, management is expecting sales to increase more than 40% in fiscal 2022.
Like practically all technology and growth stocks, Cloudflare shares are down year-to-date — by roughly 20% on macroeconomic concerns. That means right now is a great time to get in.
CrowdStrike (CRWD) is another company that provides users with a protective cloud-computing platform.
Called Falcon, in a nutshell, it protects computers, smartphones, tablets, etc., from cyberattacks. That’s called “endpoint protection.”
The company offers more than 20 different software-as-a-service (SaaS) modules that clients can subscribe to. In its most recent quarter, CrowdStrike reported 68% of its clients used at least four modules – a 61% increase from the previous year.
CrowdStrike reports that its system captures more than 1 trillion events daily and uses artificial intelligence (AI) to continuously learn and evolve. When the company’s AI fights a particular kind of hack attack on one client, it learns how to prevent similar attacks on all of its clients.
CrowdStrike was founded in 2011 and is headquartered in Austin, Texas. It has an impressive roster of clients, including 63 of the members of the Fortune 100 and 14 major banks. All told, CrowdStrike has nearly 15,000 customers — an roughly 75% increase from last year.
In the third quarter of CrowdStrike’s fiscal 2022 (which ended in October 2021), the company’s annual revenue grew 67% year-over-year to $1.51 billion.
We can expect to see this kind of growth continue.
As with Cloudflare (and the rest of the tech sector), CrowdStrike’s stock has been beaten down recently. And it’s likely we could see more volatility in its stock. However, this remains a very strong play to profit from the growing cybersecurity market.
Based in Sunnyvale, California, Fortinet (FTNT) develops and sells cybersecurity products, including antivirus software, firewalls, endpoint security parts, and intrusion prevention systems.
Fortinet has more than 550,000 customers around the world. Its most popular product is the FortiGate next-generation firewall (NGFW), which protects clients’ networks from unwanted traffic.
Unlike some of the other picks on this list — and unlike many tech stocks in general! — Fortinet is profitable. The company reported a GAAP (Generally Accepted Accounting Principles) operating margin of 19.5%.
The company also delivered impressive sales in fiscal 2021 that grew 29% year-over-year. Total revenue came in at $3.34 billion. Cash from operations also increased from $1.08 billion in 2020 to $1.5 billion in 2021.
Because of its actual profitability — not just the promise of prophets — Fortinet’s stock has actually grown 100% in value over the last 12 months. But that’s not to say there’s no growth left in this stock.
San Francisco-based Okta (OKTA) is a company that provides clients security by focusing on identity management. Its multifactor authentication services have been a hit with employers that let workers go remote during the COVID pandemic.
The company’s fiscal 2022 third quarter wrapped up in October. Revenue increased 61% year-over-year, to $351 million. And Okta’s remaining performance obligations were worth $2.35 billion.
Okta’s management expects revenues to grow over the coming years, too. It issued guidance for fiscal year 2026 (which will end on January 31, 2026) that projects annual revenue north of $4 billion and with a free-cash flow margin of 20%.
So why not get in on this stock now?