Savvy investors are eyeing cheap yet promising cybersecurity stocks, capitalizing on the growing market trend while contributing to the resilience of our digital infrastructure.
The demand for online protection is surging in the wake of the Russian invasion of Ukraine. This exponential increase underscores the pressing necessity for improved digital security measures. As a result, the cybersecurity sector is witnessing substantial growth, making it an opportune time to explore this arena. Recognizing the urgent need for cybersecurity solutions, individuals and businesses actively seek reliable safeguards to protect their digital assets.
According to the International Data Corporation, global security spending is projected to reach an impressive $219 billion in 2023, with further growth expected, surpassing the $300 billion mark by 2026.
Tech companies have the potential to reap substantial rewards by securing a slice of this expanding pie. With 2023 proving to be a year of strong momentum for leading cybersecurity stocks, astute investors with a growth-oriented mindset should seriously consider delving into this captivating niche on Wall Street.
Amid the rising wave of cyber threats, positioning oneself strategically in the realm of cheap cybersecurity stocks, undervalued gems, or even established market players before their anticipated bounce back is crucial. This approach has the potential to yield significant gains and take advantage of the increasing demand for robust cybersecurity solutions.
Explore the following five cybersecurity stocks as you wisely consider the investment decision in the world’s growing interconnectedness. Be ahead of the game and embrace the allure of this dynamic sector that promises both security and growth potential.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) recently impressed investors with another quarter of robust growth, exceeding expectations. In Q3 of fiscal 2023, revenue surged 14% YoY to $14.6 billion, surpassing estimates by $210 million. Adjusted EPS surged by 15%, reaching $1.00, surpassing the consensus forecast by three cents.
During the third quarter of the fiscal year 2023, there was a notable increase in revenue, with a year-on-year growth of 14%, amounting to $14.6 billion. This exceeded the estimated figures by $210 million. Moreover, the adjusted earnings per share experienced a significant surge of 15%, reaching $1.00, surpassing the consensus forecast by three cents.
Cisco’s diverse business segments have shown consistent growth. Revenue from secure and agile networks, internet for the future, and optimized application experiences witnessed substantial year-over-year (YoY) growth. While end-to-end security services and collaboration faced challenges, Cisco’s strengths compensated for those weaknesses.
Notably, Cisco’s margins have stabilized after facing supply chain disruptions in the past. The company anticipates further stabilization. It predicts an increase in adjusted EPS of 27% to 29% year over year in the fourth quarter, with a long-term growth forecast of 5% to 7% from fiscal 2021 through fiscal 2025.
Cisco’s stock is attractively priced at just 12.6 times forward earnings, offering a compelling forward yield of over 3%. This combination of a low valuation and high dividend yield cushions against downside risks.
Investing in stocks like Cisco Systems is a prudent long-term strategy, considering the bounce-back potential in the cybersecurity sector. With its track record of consistent growth, attractive valuation, and dividend yield, Cisco presents a promising opportunity for investors to capitalize on the future rebound of cybersecurity stocks.
Fortinet (NASDAQ:FTNT) has experienced remarkable growth, increasing its customer base to over 660,000 subscribers. This surge in recurring subscription charges has provided a steady cash flow, driving continuous expansion in the cybersecurity sector.
Despite macroeconomic challenges impacting software spending, the company expects a 23% to 24% increase in revenue for 2023, building upon its strong 32% growth in the previous year.
Fortinet’s early dominance in the market for “next-gen” firewalls, which offer enhanced security features compared to traditional firewalls, can be partly attributed to its success. Their competitive advantage has been instrumental in their accomplishments.
In addition to its strong growth, investors should know three key aspects of Fortinet’s business. First, the company continues to expand its ecosystem by introducing new services and making strategic acquisitions. The inclusion of new companies and services to bolster its lineup will help the company alleviate the impact of potential softening in revenue growth.
Second, Fortinet sets itself apart by developing proprietary ASIC chips customized for its hardware and FortiOS operating system. These chips provide significant computing power advantages, allowing for the consolidation of security functions while maintaining performance and cost efficiency.
Finally, Fortinet stands out from its competitors due to its unique ecosystem. The installation of Fortinet’s security equipment prompts customers to engage in ongoing payment for software and services associated with the hardware. As a result, the significant increase in product sales is expected to lead to continued growth in service sales over the next few years.
Considering these factors, Fortinet remains an appealing long-term investment in cybersecurity. By addressing vulnerabilities and strengthening its security measures, Fortinet can safeguard its customers’ digital assets and continue its upward trajectory.
Investors seeking cheap cybersecurity stocks should consider Zscaler (NASDAQ:ZS). It has grown impressively, with a 54% CAGR in revenue from 2017 to 2022. Currently serving over 6,000 customers, including 30% of the Fortune 500, Zscaler secures a staggering 300 billion transactions daily.
Analysts project Zscaler’s revenue to grow at a 33% CAGR from 2022 to 2025, while its adjusted EBITDA is expected to rise at a 54% CAGR. These high growth rates indicate the potential for further stock appreciation, despite its current valuation of 15.9 times this year’s sales.
Zscaler is a cloud-native cybersecurity company, providing scalable “zero trust” services through cloud-based tools. This approach, shared by its peer CrowdStrike, offers cost-effectiveness and convenience without physical installations.
The broader market for cloud-native software and cybersecurity is set to expand, presenting Zscaler with growth opportunities. Verified Market Research predicts a 23.5% CAGR for the cloud-native software market from 2023 to 2030. And Fortune Business Insights estimates a 13.8% CAGR for the global cybersecurity market during the same period.
Zscaler’s commitment to innovation is evident in its adoption of generative AI. The company plans to enhance its zero trust tools and introduce new security services, benefiting from the projected 32% CAGR of the generative AI market from 2022 to 2031.
Considering these factors, Zscaler appears poised for success. Its cloud-native approach, focus on generative AI, and positive insider sentiment make it an appealing investment in the expanding cloud, cybersecurity, and AI markets.
CrowdStrike Holdings (CRWD)
CrowdStrike Holdings (NASDAQ:CRWD), a cloud-native software company, dominates the realm of cybersecurity stocks. With its affordable yet advanced solutions, it captivates investors seeking undervalued and cheap cybersecurity stocks. Investing in CrowdStrike is a smart move in the world of cybersecurity.
This innovative company specializes in endpoint security, safeguarding laptops, PCs, smartphones, and all connected devices. Its cloud-based nature empowers remote work, making it an ideal choice. Detecting breaches and hunting threats, CrowdStrike’s software utilizes machine learning, a remarkable form of artificial intelligence.
Deploying to millions working from home and billions of connected machines, CrowdStrike’s modules ensure impeccable data protection. Integration agreements with other tech giants enhance consistency across IT infrastructures. Despite a dip in the premium-priced stock last year, CrowdStrike’s sales have surged, and its profitability shines through strong free cash flow.
In this mobile-driven era, where devices continually join the online realm, CrowdStrike thrives. The company’s brisk growth trajectory is undeniable, rendering it an appealing choice for cybersecurity stock enthusiasts. Seize the opportunity and invest in CrowdStrike, where brilliance meets security.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW), a cybersecurity stalwart, stands out with its expertise in firewalls safeguarding physical locations. However, the real growth lies in the cloud era, where it has acquired numerous cloud-native businesses, boosting profitability. With a next-gen security portfolio geared for the cloud, double-digit revenue growth is on the horizon, signaling promising times. In 2022, the company’s stock outperformed its peers, and 2023 holds similar potential.
As the largest pure-play cybersecurity operation, Palo Alto Networks has become a leading cloud security provider. Interestingly, its shares trade at a relative value compared to its younger cloud-native rivals, offering a potential opportunity. Notably, the company executed a 3-for-1 stock split in September 2022, further enhancing its market position.
Investors seeking exposure to cybersecurity stocks should consider Palo Alto Networks. With its strong foundation in firewalls and successful foray into cloud security, it offers a unique investment opportunity. The company’s growth prospects and market leadership make it an appealing choice for those looking to invest in cheap cybersecurity stocks.
On the publication date, Faizan Farooque did not hold (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.