Cybersecurity remains an important and fast-growing industry. The global market for cybersecurity is forecast to grow by about 10% per year and, by 2028, reach nearly $275 billion. The market is being driven by all facets of society: individuals, businesses and governments, all of which are vulnerable to cyberattacks. And cyber incidents are becoming more and more costly every year.
According to the FBI, cybercrime cost individual Americans more than $12 billion in 2023, and that cost is rising as both domestic and foreign criminals illegally access computers and networks, stealing money, data and other valuable information and assets. In all, cybercrime is estimated to have cost the global economy $8 trillion, equal to about $250,000 per second. No wonder cybersecurity companies are thriving.
Here are the three most undervalued cybersecurity stocks to buy in May 2024.
Palo Alto Networks (PANW)
Cybersecurity firm Palo Alto Networks (NASDAQ:PANW) will be looking to get out of the dog house with investors when it reports its next financial results on May 20. PANW stock fell 19% after the company’s last print in which it lowered its full-year guidance for both revenue and billings. The lowered guidance stole the show and analysts and investors seemed not to notice that Palo Alto beat Wall Street forecasts on both the top and bottom lines.
The company forecast full-year 2024 billings of $10.10 billion to $10.20 billion. This is down from previous guidance of $10.70 billion to $10.80 billion. Full-year revenues were also lowered to between $7.95 billion and $8 billion, which was lower than the previous guide for $8.15 billion to $8.20 billion. Management said during their earnings call that the lowered guidance was due to a shift in strategy and wanting to accelerate growth in AI products. Mentioning AI, however, did little to help the stock.
Year-to-date, PANW stock is up only 5%. Investors may want to take a position before the next print leads to a rebound in share price.
SentinelOne (S)
Shares of cybersecurity firm SentinelOne (NYSE:S) are down 16% this year despite the fact that the company delivered financial results that topped the consensus forecasts of Wall Street analysts. For the fourth quarter of 2023, SentinelOne reported an earnings per share (EPS) loss of 2 cents, which was much better than the loss of 4 cents that was expected among analysts. Revenue for the quarter came in at $174.2 million, up 38% from a year earlier and ahead of Wall Street estimates of $169 million.
As with Palo Alto, SentinelOne was undone by guidance that underwhelmed investors, sending its stock down 11% immediately after the print, where it has languished ever since. For all of this year, SentinelOne sees revenue of $812 million to $818 million. Management cited cost pressures from recent acquisitions as the reason for guidance that left Wall Street wanting more from the company. With a market capitalization of less than $7 billion, SentinelOne is one of the smaller cybersecurity firms.
Investors should treat the drop in S stock as a buying opportunity.
International Business Machines (IBM)
A less obvious choice in the cybersecurity space is International Business Machines (NYSE:IBM). However, the company does protect businesses with advanced enterprise cybersecurity solutions that increasingly employ AI. And IBM stock looks certainly affordable, if not undervalued, trading at 19 times future earnings estimates and offering a quarterly dividend payment that yields 4%. IBM stock has also recently sold off following the company’s latest earnings print, creating an opportunity for investors.
IBM stock has also been affected by news that the technology giant is acquiring cloud software maker HashiCorp (NASDAQ:HCP) for $6.4 billion. Analysts and investors appear to be taking a wait-and-see approach to the deal. For its part, IBM says the acquisition will be accretive to its earnings in the first full year after it closes. The company hopes to finalize the acquisition by year’s end. IBM also continues to roll out AI products, noting that it has armed its 160,000 consultants with AI assistants to boost productivity. IBM stock is up 4% on the year.
On the date of publication, Joel Baglole 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.
