You can call it a correction, a selloff, or maybe the beginning of a crash. Whatever term you use to describe it, equity prices are falling. The tech-heavy Nasdaq index is still up 8% in 2024, but it’s down approximately 3% in April. That’s bringing down valuations in sectors like cybersecurity. However, for long-term investors, this creates an opportunity to look for cybersecurity stocks to buy on the dip.
Cybersecurity has become a “must-have” application. The prevalence of ransomware attacks is just one concerning trend as companies of all sizes reconcile the cost of cybersecurity along with the increasing costs of running their businesses.
That’s why it’s still a good time for investors to find cybersecurity stocks to buy. Despite lofty valuations, and in some cases an unclear path to profitability, cybersecurity stocks will grind higher in a higher interest rate environment. And when the economy recovers, these stocks will lead the way as corporate spending increases.
Palo Alto Networks (PANW)
Palo Alto Networks (NYSE:PANW) is a behemoth in the cybersecurity space with a $95 billion market cap. PANW stock is down about half a percent in 2024. That’s because of the sharp sell-off that occurred during the company’s last earnings report.
At that time, the company announced a new “platformization” strategy. Specifically, it was going to try to capture more market share by allowing customers to have free access to some of its services. While analysts were caught off guard, it could turn out to be a savvy move as Palo Alto attempts to counteract the spending fatigue its customers are feeling.
The resulting forecasts are showing much slower growth that caused analysts to reprice PANW stock. In fairness, shareholders haven’t suffered too much. PANW stock is still up 60% in the last 12 months even after falling about 15% since the last earnings report.
Analysts project 16% earnings growth for Palo Alto in the next 12 months. And the consensus price target of $334.35 would give PANW stock a 14.13% upside. Also, with short interest lower in the last month, there’s less friction heading into the next round of earnings.
ZScaler (ZS)
ZScaler (NYSE:ZS) is a leader in cloud-native cybersecurity solutions. The company specializes in zero-trust applications in which every attempt to access a network, even by high-level company executives, is considered a potential threat. This combination makes ZScaler’s offerings cost-effective and easy to scale.
That aside, ZS stock is down 21.25% in 2024 with the entirety of that loss coming after the company’s February earnings report. A report, by the way, in which the company beat on both the top and bottom lines. One reason may be that ZScaler is not profitable today, and it won’t be for some time even with ideal market conditions.
Still, there was nothing in the company’s report that suggests a lack of growth. And the zero trust market is expected to expand at a compound annual growth rate (CAGR) of 17% through 2030. With that in mind, investors should regard this as a normal pullback and continue to regard ZScaler as one of the top cybersecurity stocks to buy.
CrowdStrike (CRWD)
CrowdStrike (NASDAQ:CRWD) is one of the sector leaders in endpoint security. Contrary to what the name suggests, this is the front line of a company’s cybersecurity defense. It means that every device (e.g. laptop, server, workstation, mobile device) can be an opportunity (and risk for the company) for cyber criminals to exploit and capture corporate data.
This has been the case with many of the recent ransomware attacks. In 2023, Gartner Research named CrowdStrike’s Falcon platform as one of the best endpoint security platforms of the 16 it evaluated.
And based on CrowdStrike’s growing annual recurring revenue (ARR) the company’s customers continue to see the value that its services provide.
CRWD stock is up 17% in 2024. However, the stock has been falling in April and the story is familiar to the other stocks on this list. A good earnings report, but investors perhaps feel the stock got overvalued. Analysts remain bullish on the stock with a consensus price target of $398.03, which gives CRWD stock a 34% upside from its price on April 30, 2024.
On the date of publication, Chris Markoch did not have (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.
