Cybersecurity plays an ever-increasing role in our daily lives. Sure, the latest PC you bought or the application you downloaded adds a lot of joy to your life. However, lurking in the shadows are bad guys trying to tap into your privacy.
So, a surge in cybercrime prompts a rise in cybersecurity. The industry is set to grow at a compound annual growth rate of 11.44% until 2029, presenting secular growth opportunities.
Among numerous industry constituents, three best-in-class cybersecurity stocks stand out. Each asset hosts solid fundamentals and aligned quantitative metrics. So, let’s delve into the three best cybersecurity picks to buy this month.
Crowdstrike Holdings (CRWD)
Crowdstrike (NASDAQ:CRWD) is an integrated cybersecurity company primarily offering cloud workload and endpoint, threat intelligence, and cyberattack response. Unlike most cyber companies, Crowdstrike provides affordable products and services, allowing succinct customer switching. The firm’s high-quality, fair-cost model has led to secular growth which looks set to continue.
The company’s latest earnings report illustrated the aforementioned. Crowdstrike’s fourth-quarter report communicated annual recurring revenue of $3.44 billion, a 34.4% year-over-year (YOY) increase. Furthermore, CRWD retained an 80% subscription gross profit margin, suggesting economies of scale are en route.
Approximately 94.16% of the company’s revenue derives from subscriptions. However, the artificial intelligence (AI) boom provides its Professional Services Segment with significant potential. Despite AI’s popularity, corporate AI transition is complex and generally assisted by cyber companies. Will Crowdstrike leverage this market? It is highly likely.
CRWD is grossly undervalued. For instance, its price-to-sales ratio of 25.58x is at a five-year discount near 12%. Moreover, the stock is trading above its 10-, 50-, 100-, and 200-day moving averages, indicating a momentum trend has occurred.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) operates in the advanced firewall and adjacent cloud-based business. The company hosts best-in-class status with a scintillating return on common equity ratio of 89.52%. Additionally, the stock is highly touted on Wall Street, with numerous analysts backing it to succeed throughout 2024.
Let’s look at a few of the calls on Wall Street to set a baseline.
Edward Stanley of Morgan Stanley (NYSE:MS) recently added Palo Alto Networks to a list of “high productivity” plays. The basis of Stanley’s argument stems from AI integration and the phenomenon’s operational efficiency benefits. Furthermore, Argus emphasized its bullish outlook on PANW earlier this month, upgrading PANW’s price target to $336 from a previous $290 based on demand factors.
Many investors are worried about Palo Alto Networks’ strategy shift. In an announcement last month, Palo Alto’s management indicated a pivot to provide more free offerings. This could potentially dent its billings by $600 million toward the back end of this year. However, this is a temporary change in strategy to stimulate long-term demand. Basically, Palo Alto’s decision is long-term value-driven. Further, the firm has a cash position of nearly $3.37 billion.
Also, the stock has a price-to-earnings-growth ratio of 0.01x, and the company has a five-year compound annual growth rate of 23.75%. Considering these metrics alongside Palo Alto Networks’ fundamentals, consider it a growth-at-a-reasonable price opportunity.
Radware (RDWR)
Radware (NASDAQ:RDWR) is primarily known for protecting against identity theft, protection against malicious user behavior, and related cloud protection services. Although mostly used for Azure and Amazon Web Services (AWS) applications, Radware is positioned for future expansion, providing its investors with much to anticipate.
The company and the stock alike possess numerous tailwinds. First, Radware recently signed a downstream agreement with Spark NZ. This allows Spark to re-sell its services throughout New Zealand, providing Radware with geographic diversification. Furthermore, Radware released its fourth-quarter earnings, beating its revenue target by $990,000 and its earnings target by one cent per share.
Furthermore, its annual recurring revenue grew by 22% YOY. Moreover, RDWR has a price-to-sales ratio of merely 3.12x. Is RDWR undervalued? I certainly think so.
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.
