An amalgamation of recent events goes to show how important cybersecurity is. For example, consider the AT&T (NYSE:T) hack that occurred a few weeks ago. Although merely a single event, it sparked demand for cybersecurity, and I won’t be surprised if additional idiosyncratic events do the same.
Systematically speaking, cybersecurity is set for a secular growth trajectory. The industry’s end market is anticipated to surge by 11.44% annually until 2029. Moreover, numerous cybersecurity platforms have exited their beta stages, lending the industry a boost in monetization opportunities.
Despite the allure of cybersecurity as an industry, picking winning stocks is challenging due to their volatility. As such, I dialed in on its constituents to discover best-in-class assets.
Considering the aforementioned, here are three cybersecurity stocks to pay attention to.
CrowdStrike Holdings (CRWD)
CrowdStrike (NASDAQ:CRWD) is an ever-growing cybersecurity firm with offerings spanning workload and endpoint security, threat intelligence, and cyberattack response services.
The company’s high-quality yet affordable products and services have led to abrupt growth. CrowdStirke’s fourth-quarter results conveyed this fact as its subscription revenue settled at $795.95 million, a 33% year-over-year increase. Moreover, CrowdStrike achieved $49.39 million in quarterly services revenue. I believe its services segment hosts underrated potential as the AI boom will raise demand for integration services.
Furthermore, CrowdStrike possesses solid quantitative metrics. For example, CrowdStrike’s free cash flow margin of 32.75% is accompanied by a five-year compound annual growth rate (CAGR) of 65%.
In essence, CRWD stock is a secular growth opportunity. Don’t miss out!
CyberArk Software (CYBR)
CyberArk (NASDAQ:CYBR) stock is a momentum play. In truth, these are not my own words. Wells Fargo (NYSE:WFC) recently screened for momentum stocks with bullish trajectories and included CyberArk on its list.
Chris Harvey of Wells Fargo thinks stocks such as CyberArk could benefit from sustained momentum due to market-based anomalies. I concur with Harvey’s outlook, as secular growth technology stocks will likely beat the market unless a significant structural break occurs within the economy. Moreover, CyberArk possesses robust growth, communicated by its 16.98% five-year CAGR and its scintillating leveraged free cash flow margin of 14.19%.
Let’s dial in on CyberArk’s distinct features to add breadth to the analysis.
CyberArk, which delivers identity management to various sectors, released its fourth-quarter earnings report in February. The company triumphed, beating its revenue target by $13.36 million and its earnings-per-share target by 34 cents. Moreover, CyberArk’s report communicated $582 million in annual recurring revenue, a 60% year-over-year increase, suggesting market share expansion is en route.
Okay, its fundamentals are solid, but is CYBR stock undervalued? CYBR stock’s price-to-sales ratio of 14.72x is above its five-year average of 11.04x. As such, suggesting relative value is astray. However, I think we are looking at a high-quality growth play, which I base on CyberArk’s fundamentals and trend-like behavior (CYBR stock is trading above its 10-, 50-, 100-, and 200-day moving averages).
Okta, Inc. (OKTA)
Okta (NASDAQ:OKTA) is primarily a business-to-business identity protection firm. The company spent the better part of 15 years building its product pipeline, but financial success has emerged in recent years.
OKTA stock has surged by nearly 20% in the past month. Many suggest that an upgrade by Bank of America (NYSE:BAC) drove its stellar month-over-month performance. The U.S. banking giant upgraded the stock to “Buy” from “Underperform” with a price target of $135.
I agree with Bank of America’s outlook, as Okta’s latest financial results show resilient growth. For example, Okta’s fourth-quarter results communicated $605 million in revenue, a 19% year-over-year increase led by a 20% increase in subscription revenue. Moreover, Okta’s non-GAAP operating income settled at $129 million, translating into a gross profit margin of approximately 21%.
Much of Okta’s tailwinds are systemic. Nevertheless, the company possesses numerous differentiating factors. For one, Okta provides a cloud-based identity management platform that integrates with more than 7,000 applications, allowing it scalability. Additionally, Okta’s strong revenue base provides it with the necessary latitude to expand into emerging markets (EMs); EMs could onboard diversified revenue and scalability.
To conclude, let’s look at OKTA stock’s valuation metrics.
OKTA’s price-to-earnings-growth ratio of 1.65x is below the sector average of 1.95x. In addition, OKTA has a put/call ratio of 0.52x, indicating optimism from the options market.
On the date of publication, Steve Booyens did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
