41 state attorneys general have penned a letter to Meta Platforms (NASDAQ:META) expressing concerns over the increasing number of complaints about hacked Facebook and Instagram accounts, as Wired reported last week. There could be a solution to this. One of them is for Meta to scour the landscape of cybersecurity stocks and select some for acquisition targets.
Some of the illicit activities the platform faces include charging large sums to stored credit cards or running unauthorized advertisements. As cybercrime rises worldwide, the prevalence of scams on sites like Facebook has seemingly gotten worse and more brazen. The letter reported a significant increase in complaints between 2019 and 2023, with victims being left in the dark and reportedly tying up the resources of law enforcement officials dealing with the aftermath.
So, in this article, I’ve proposed seven cybersecurity stocks that Meta could acquire to help protect its web properties and potentially restore some lost trust by users who hackers and cyber criminals have burned in the past.
Cybersecurity Stocks: Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) is one of those cybersecurity stocks that Meta could potentially acquire. Although FTNT’s market cap of around 54 billion at the time of writing is arguably pricey, the company’s outlook over the short term looks attractive.
FTNT stock is expected to grow by approximately 10% CAGR in 2024. The company has projected revenue for the first quarter of 2024 in the range of $1.30 billion to $1.36 billion. Billings are in the range of $1.39 billion to $1.45 billion.
The company is expecting a shift in the cybersecurity industry which is central to its strategy. Fortinet, citing Gartner, notes that 97% of organizations have plans for vendor consolidation, highlighting the industry’s shift towards fewer, more dominant players in the industry.
Finally, FTNT’s earnings per share (EPS) is expected to grow 19.57% this year, which could mean that the company will soon be valued higher.
Zscaler (ZS)
Zscaler (NASDAQ:ZS) could be an attractive pick for a Meta acquisition, as it currently serves over 40% of Fortune 500 companies, which could open the door for Meta to cross-sell some of its complementary enterprise services.
ZS stock’s price tag is slightly lower, with a market cap of just 29 billion. But like with the other cybersecurity stocks on this list, the company’s outlook and recent financial performance have been impressive.
For Q2 2024, Zscaler expects EPS in the range of 57 cents to 58 cents and revenue between $505 million and $507 million. The full fiscal year 2024 projections include an EPS of $2.45 to $2.48, revenue of $2.09 billion to $2.1 billion, and operating income between $360 million and $365 million.
Another draw card for ZS in terms of acquisition by Meta is its Zero Trust Exchange platform, which connects users directly to apps and eliminates traditional security vulnerabilities. This could be key to preventing the mass of account takeovers for Meta if successfully integrated.
Cybersecurity Stocks: CrowdStrike (CRWD)
CrowdStrike (NASDAQ:CRWD) is known for safeguarding critical cloud workloads and could prove to be an accretive acquisition for Meta; both in terms of its potential synergy with its core business as well as a potentially lucrative diversifier.
CRWD recently reported a significant beat on both the top and bottom lines, with earnings per share of 95 cents adjusted compared to an expected 82 cents, and revenue of $845 million versus an expected $839 million. Full-year revenue increased by 36% year-over-year (YOY), reaching $3 billion.
Looking ahead, it has expected revenues between $902 million and $906 million for the next quarter surpassing the consensus estimate. Similarly, earnings per share for the period are expected to be between 89 cents and 90 cents, also exceeding the consensus estimate. It is also committed to achieving $10 billion in annual recurring revenue by 2030.
With a market cap of 77 billion, CRWD is one of the more expensive companies on this list, but an acquisition by META could be highly accretive. Its EPS should swell to 7.11 before FY2028, up from 2.81 at the time of writing. With its specialty in safeguarding the cloud and significant commercial relationships, it could pan out to be a strong investment.
Varonis Systems (VRNS)
Varonis Systems (NASDAQ:VRNS) is one of those small-cap cybersecurity stocks with a market cap of just 5.4 billion. Its valuation alone could be a substantial deciding factor in making it an acquisition target for META. Its specialization in Data Security Posture Management (DSPM) takes the cake, though. DPSM allows organizations to see where their sensitive data is and who has access to it. These are two things that META could leverage to help secure its user accounts.
Meanwhile, VRNS is undergoing a SaaS transition, aiming to complete it by 2026, a year earlier than previously anticipated. Once complete, the transition should comprise 70% to 90% of the company’s total ARR.
Varonis also finished FY2023 with an ARR of $543 million, a 17% YOY increase. It saw a substantial boost in free cash flow to $54.3 million in 2023 from $0.5 million the previous year.
SaaS companies, in general, can be lucrative acquisition targets. This is especially true for companies that already heavily rely on SaaS, such as META. META’s existing book of business could also synergize well with its offerings.
Cybersecurity Stocks: CyberArk (CYBR)
CyberArk (NASDAQ:CYBR) specializes in privileged access management. This is a crucial step towards mitigating illegal account takeovers for META users.
The company expects its total revenue for the full year to range between $920 million and $930 million. This surpasses the consensus estimate of $915.82 million. For the first quarter of 2024, revenue is forecasted to be between $209 million and $215 million, again beating the consensus estimate of $207.25 million.
A great thing about CYBR is its market cap, standing at $11 billion, and analysts are also bullish on the company’s long-term prospects.
Although there’s a slight predicted decrease for its stock price within the next twelve months, its EPS is predicted to skyrocket 89.45% next year, which would put it firmly in profitability at 1.79.
Buying small-growing companies while they are still cheap to scoop up can be a viable strategy. Furthermore, its privileged access management software could potentially plug some holes in META’s stock stack. Thus, CYBR is one of those cybersecurity stocks for the company to consider acquiring.
Check Point (CHKP)
Check Point (NASDAQ:CHKP) is a key player in the cybersecurity space, emphasizing comprehensive protection for its clients. This is despite its slightly lower valuation relative to some of its peers at 18 billion at the time of writing.
In its most recent earnings for Q4 2023, CHKP surpassed analyst expectations with an EPS of $2.57, which was 10 cents higher than the consensus estimate of $2.47. The company’s revenue for the quarter stood at $663.50 million, slightly above the forecast of $662.09 million.
The reason I like CHKP is that its offerings could synergize well with the needs of META. Namely, it offers a comprehensive suite of services, which the market is steadily heaving towards as a long-term trend. This then positions it well for the future.
Meanwhile, the company gave an EPS range for 2024 that will be between $8.70 and $9.30, against a consensus estimate of $9.05. Revenue expectations are set between $2.5 billion and $2.6 billion, aligning with the consensus revenue estimate of $2.5 billion.
Okta (OKTA)
Okta (NASDAQ:OKTA) is the last of those cybersecurity stocks among potential good fits for a Meta acquisition. The company’s valuation dipped into the $80 range this year but has since rebounded.
The key reason I believe that OKTA could be a good target is that in addition to providing robust cloud security services, the company is also undervalued relative to its long-term growth potential, which could be accretive for the acquiring business.
Meanwhile, OKTA’s outlook seems robust. For the first quarter of fiscal 2025, the company is projecting EPS to be between 54 cents and 55 cents. Revenue expectations range from $603 million to $605 million. This guidance surpasses the consensus revenue estimate of $584.9 million.
Also, at an $18 billion market cap, the firm’s assets and future free cash flows could be cheap for META to acquire. Additionally, it provides further opportunities to grow its earnings via offering additional enterprise services to its customer base.
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.
