It’s been a tumultuous first half of 2024 for cybersecurity stocks as early optimism was handed a reality check amid challenging first-quarter earnings for leading industry players like Cloudflare and Fortinet (NASDAQ:FTNT).
With worse-than-expected billings shortfalls pushing cybersecurity stocks lower, the complex state of the industry has been laid bare for investors.
There’s little doubt that the cybersecurity industry is full of potential, and projections of market revenue to reach $185.70bn in 2024 underline the growing relevance of the landscape.
As the technology at the hands of cybercriminals becomes more sophisticated, the necessity of cybersecurity solutions to counter growing threats is imperative.
However, the industry has become a saturated market, and with signs of the generative AI boom cooling across the tech sector, we may see some popular cybersecurity stocks begin to struggle. With this in mind, the following three stocks may be in danger of crashing as market sentiment declines:
Okta (OKTA)
One stock that may be in danger of suffering in a saturated cybersecurity market is Okta (NASDAQ:OKTA).
One key cause for concern is that Okta experienced a security breach in October 2023 in which the cybersecurity firm confirmed that hackers stole data about all of its customers despite initially stating that just a fraction of customers were affected.
The impact of the breach saw Okta’s share price fall more than 23%, and although the stock managed to recover its losses in a Q1 2024 rally, it’s feared that the security breach has caused severe damage to the reputation and trustworthiness of the company for its customers.
After its strong Q1 2024 recovery, Okta opted to raise its revenue growth forecasts to between 13% and 14% to between $631 million and $633 million. However, this decision carried a negative impact on the stock, which has since retraced 17% from its 2024 peak.
The reason for this decline is that Okta’s raised guidance still points to slowing revenue growth in the back half of the year despite beginning 2024 with an emphatic recovery.
SentinelOne (S)
It’s been a challenging year for SentinelOne (NYSE:S) so far, with the stock suffering a decline of around 20% over the first two quarters of 2024.
The stock’s difficulties have followed the cybersecurity firm since its 2021 NYSE debut, where after a period of strong growth, SentinelOne embarked on a sustained period of losses throughout the years that followed.
Today, SentinelOne sits more than 72% below its 2021 peak value with little hope for a meaningful market recovery taking place soon. Worryingly, the stock tumbled further recently despite relatively strong Q1 earnings due to a revenue guidance pullback.
The firm revised revenue guidance to between $808 million and $815 million in comparison to an earlier call for between $812 million and $818 million, with analyst estimates falling closer to $814.9 million.
These shortcomings have seen the stock trail in the wider cybersecurity markets, suggesting that investors may be better positioned to seek out alternatives elsewhere for their portfolios.
Fortinet (FTNT)
With a market capitalization of over $46 billion, it’s clear that Fortinet is a star cybersecurity stock. However, its recent form should be a cause for concern among investors.
Fortinet is another example of a cybersecurity stock that’s come unstuck amid its Q1 earnings. During the quarter, the firm recorded an increase in revenue by 7.2% to $1.35 billion, beating estimates of $1.33 billion. However, Fortinet’s billings tumbled 6% year-over-year to $1.41 billion, falling below expectations of $1.43 billion.
Likewise, earnings per share (EPS) weighed in at $0.34, falling below analyst forecasts of $0.38.
Following its challenging Q1 2024 earnings, Fortinet sits more than 17% adrift from its peak value recorded over the calendar year and may struggle to recapture momentum in a market that’s become increasingly competitive amid a generative AI boom that’s beginning to show signs of cooling.
On the date of publication, Dmytro Spilka 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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.
