Stocks & Funds

3 Cybersecurity stocks which can match up cybersecurity industry’s growth

Cybersecurity Stocks

Looking for Cybersecurity stocks for investment? Experts believe that size of global cybersecurity market was pegged at USD202.72 billion in 2022 and this industry is expected to compound at 12.3% over 2023 – 2030. Growth of market is expected to stem from higher number of cyber-attacks as a result of emergence of e-commerce platforms, increased usage of cloud solutions, and proliferation of smart devices. Cyber threats might evolve because of higher usage of devices with intelligent along with IoT technologies. 

As a result, global companies might adopt and use advanced cybersecurity solutions so that these companies can detect, mitigate, and minimize risk of cyber-attacks, which should help in boosting market growth. Cybersecurity industry saw a dip in 2020 because of numerous organizations during the 1Q20 and 2Q20. However, there was some recovery in the market by 2Q end as several firms employed numerous cyber security solutions. This was done because the companies decided to implement remote working culture. Employees used their private devices for business work and they tend to connect their private Wi-Fi or anonymous networks. These activities can put the company’s security at risk. Therefore, numerous organizations used cyber security solutions to manage and secure endpoint devices. 

Market is anticipated to grow even after COVID-19 pandemic because of hybrid working trend which is expected to stay for the coming future. These employees might continue to work from their home, which will make usage of security platforms even more desirable. 

With this in mind, let us have a look at the stocks which are expected to flourish with the growth of cybersecurity industry.

3 Best Cybersecurity Stocks for Long-term gain:

  1. Microsoft
  2. Check Point Software Technologies Ltd.
  3. Tenable Holdings, Inc.

1. Microsoft

Most of the investors believe that Microsoft is not a cybersecurity company. This is because the company generates majority of its revenues from businesses like cloud-based services, Windows operating system, and Xbox gaming business. However, the company made some serious acquisitions of smaller cybersecurity stocks over past couple years. The company has upgraded its Defender antivirus software. In 2021, the company decided to keep $20 billion aside for cybersecurity investments. These investments enabled the company to acquire more cybersecurity companies. As a result of such acquisitions, the company expanded into network security market.

Hence, investors who are looking for balanced cloud play which also offers some exposure to ever-growing cybersecurity market, This can be one of the stocks for good long-term bet for them.

Microsoft Corp. has announced its results for quarter ended June 30, 2023 or 4Q23. The company’s revenue came in at $56.2 billion, exhibiting 8% increase (or 10% rise in constant currency), while its operating income was $24.3 billion, rising 18%. The company was able to deliver a healthy close to FY23 as a result of its Microsoft Cloud quarterly revenue of $30.3 billion, which was up by 21% year-over-year. 

For 1Q24, the company expects revenues from productivity and business processes to be between $18 billion- $18.3 billion, while revenues from its intelligent cloud is expected between $23.3 billion- $23.6 billion. For FY24, the company anticipates that growth rates of its operating expenses will remain low. 

2. Check Point Software Technologies Ltd.

Check Point Software Technologies is pure-play cybersecurity vendor, which offers solutions for network, endpoint, cloud, and mobile security apart from security management. The company announced its financial results for 2Q ended June 30, 2023 and its total revenues came at $589 million, a 3% rise year-over-year. Product and license revenues was $117 million, exhibiting 12% fall year-over-year and security subscription revenues were $239 million. 

2Q saw strong profitability with more than 22% growth in EPS. The company’s platform security strategy exhibited continued success because Infinity revenues exceeded 10% of total revenues for quarter. 

Moving forward, the company’s priority is to work on revenue growth through the delivery of prevention-first approach, with a focus on collaborative cyber security. 

Check Point Software can be considered as a good investment for investors who are looking for perfect balance of healthy growth, increasing profits, and sound valuations.

3. Tenable Holdings, Inc.

Tenable Holdings Inc provides solutions for new category of cybersecurity which is called Cyber Exposure. Offerings include and SecurityCenter. 

In 2Q23, the company’s revenue came in at $195.0 million, exhibiting 19% year-over-year growth while its calculated current billings were $200.2 million (up 15% year-over-year). For 2Q, the company’s net cash provided by operating activities was $30.2 million while its unlevered FCF was $39.8 million. 

The company’s traction with Tenable One places it well to capitalise the opportunities available in exposure management market as the company helps its customers protect their organizations and consolidate spending on security. Cash and cash equivalents and short-term investments of the company came at $645.5 million at June 30, 2023 in comparison to $567.4 million as at December 31, 2022.

For 3Q23, the company anticipates its revenue of between $197.0 million to $199.0 million and non-GAAP income from operations is expected between $26.0 million – $27.0 million. 

Non-GAAP net income is expected in the range of $22.0 million – $23.0 million for 3Q23. This assumes interest expense of $8.1 million, interest income of $6.5 million and provision for income taxes of $2.4 million. 

For FY23, Tenable Holdings Inc expects revenues of $783.0 million to $791.0 million and calculated current billings of $879.0 million to $887.0 million. However, the company’s unlevered free cash flow is expected between $180.0 million – $185.0 million.

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