The cybersecurity investment theme still stands out now that many potential attackers are harnessing the power of artificial intelligence (AI) to compromise systems. Undoubtedly, the leading cybersecurity companies are also making good use of AI. With such a powerful technology that can be used to beef up offense or defense, investors should continue to stick with the market’s top defenders as they look to protect and defend with the full power of AI on their side.
I like to check in with the iShares Cybersecurity and Tech ETF (NYSEARCA:IHAK) to gauge how the cybersecurity market has been doing. IHAK stock has recently been steadily climbing after experiencing a short-lived correction of around 13% earlier this year. Still down around 8% from its peak, I see potential value in the space. Let’s check in with three of my favorite cybersecurity stocks to buy to play the AI-driven theme.
Crowdstrike (CRWD)
CrowdStrike (NASDAQ:CRWD) is an $84 billion cybersecurity company leading the charge. At writing, CRWD stock is shy of its all-time highs, just shy of $350 per share.
With a remarkably strong first quarter that saw subscription revenues surge 42% to $651.2 million, up from $459.8 billion in the same quarter last year, Crowdstrike certainly seems like the high-momentum cybersecurity stock to own with all the momentum behind it and impressive generative AI features that could further enhance its impressive offerings.
Charlotte AI is the company’s security analyst who may offer a glimpse into the future of cybersecurity in the generative AI age. With its recently announced collaboration with Amazon (NASDAQ:AMZN) Web Service to help with its generative AI endeavors, Crowdstrike stands out as an AI-first company that could quickly outgrow the peer group in the coming years.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) is a more intriguing value option in the booming cybersecurity space for investors who don’t like chasing hot stocks near their highs. The company is in a bit of a slump, now down around 22% from its all-time high in the middle of 2023.
The firm clocked in $1.41 billion in total bookings last year, a slight drop of 6% year over year. Indeed, challenging comparables bear part of the blame. Looking ahead, Fortinet stands to tap into AI to help it keep up with rivals and the growing number of AI-equipped attackers.
The company has its own IoT generative AI assistant named FortiAI, which includes many capabilities that could help neutralize threats. Perhaps the market is discounting FortiAI’s full potential after a rough quarter that I do not view as the start of a negative trend. At 34.4 times forward price-to-earnings (P/E), I actually see FTNT stock as one of the better bargains in cybersecurity today.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) also looks like an intriguing value option after its brutal 30% implosion in February 2024. Undoubtedly, FTNT stock has come back quite a bit in recent months, but it’s still off around 18% from its peak.
Just a few days ago, Fortinet reported a mild earnings beat for its fiscal third quarter. Adjusted profits came in at $1.32, narrowly ahead of the $1.25 estimate. As for the forecast, Palo Alto sees revenue coming in line with expectations in the ballpark of $2.15-2.17 billion.
Like other cybersecurity innovations, Palo Alto is serious about improving its products with AI to help fight “advanced” cyber threats. Its Precision AI solution aims to “fight AI with AI.” Indeed, clients armed with Precision AI playing chess as potential attackers look to play checkers!
At 49.5 times forward P/E, PANW stock still seems a bit pricy. Perhaps waiting for a more substantial pullback would be best as the firm looks to stay ahead of AI-augmented hackers.
On the date of publication, Joey Frenette 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.
