Digital technologies are transforming businesses and their operations while increasing cyber threats and data privacy concerns, resulting in increased focus on cybersecurity and safety, creating several growth opportunities for the cybersecurity industry.
Given the bright outlook for the industry, fundamentally sound cybersecurity stocks Tenable Holdings, Inc. (TENB), Trend Micro Incorporated (TMICY), and Radware Ltd. (RDWR) could be ideal additions to your watchlist.
The Office of the National Cyber Director (ONCD) 2024 U.S. Cybersecurity Posture Report It will serve as a report card on the implementation of the guidelines set out in the National Cybersecurity Strategy introduced in March 2023. The strategy was implemented with a vision of a digital ecosystem that is defensible, resilient and values-aligned.
The federal government was tasked with completing 36 initiatives by the second quarter of 2024, but 33 initiatives, or 92 percent, have been completed on schedule, showing a positive outlook. The government has also taken steps during the period under review, such as establishing cyber requirements to protect critical infrastructure and strengthening partnerships with the federal government.
Cybersecurity market revenue is projected to reach $183.1 billion in 2024. Globally, the United States will generate the largest revenue, reaching $78.31 billion this year. Moreover, the market size is expected to reach $273.6 billion by 2028, growing at a CAGR of 10.6% during the forecast period (2024-2028).
Moreover, the role of AI in cybersecurity is only going to become more important over time, driving innovation in threat detection, incident response, and predictive intelligence. The global AI in cybersecurity market is expected to reach $147.5 billion by 2033, registering a CAGR of 20.8%, driven by enhancements and task automation from technologies such as voice recognition.
Given the promising market trends, let's take a closer look at the fundamentals of the top three Software – Security stocks, starting with our third pick.
Stock No. 3: Tenable Holdings, Inc. (Tembu)
TENB provides Cyber Exposure solutions internationally, including platforms such as Tenable Vulnerability Management, Tenable Cloud Security, Tenable Identity Exposure, Tenable Web App Scanning, Tenable Lumin Exposure View, Tenable Attack Surface Management, Tenable Security Center and Tenable OT Security.
On March 19, TENB expanded Tenable Cloud Security cloud native application protection platform capabilities for Kubernetes on-premise and public cloud environments. The latest enhancements extend the benefits of TENB's CNAPP to Kubernetes, including contextual risk visibility, preventative security controls and zero trust/east privilege enforcement.
New Kubernetes capabilities enable organizations to extend visibility across public and on-premise Kubernetes deployments, prevent risky deployments with preventative security controls and avoid long-standing privileges.
TENB announced innovative enhancements to ExposureAI, a generative AI capability and service within the Tenable One Exposure Management Platform, on March 13. The new capabilities enable customers to quickly summarize relevant attack paths, directly query the AI engine, and receive specific mitigation guidance.
For the first quarter ended March 31, 2024, TENB's revenue increased 14.4% year over year to $215.96 million. Non-GAAP gross profit increased 17.2% year over year to $174.68 million. The company's non-GAAP operating income was $37.01 million, up 104% year over year.
Additionally, the company's non-GAAP net income and EPS were $30.44 million and $0.25, respectively, up 133% and 127.3% year over year. Unlevered free cash flow increased 24% year over year to $54.74 million.
Per its second quarter guidance, TENB expects non-GAAP operating income to be between $34 million and $36 million. Non-GAAP net income is expected to be in the range of $28 million to $30 million, and non-GAAP EPS is expected to be between $0.22 and $0.24.
For the full year 2024, the company expects non-GAAP operating income to be in the range of $158 million to $163 million. Non-GAAP net income is expected to be in the range of $135 million to $140 million, and non-GAAP EPS is expected to be in the range of $1.08 to $1.12.
Analysts expect TENB's second-quarter (ending June 2024) revenue and EPS to increase 12.1% year over year to $218.53 million and 6.9% to $0.24. Additionally, the company has beaten consensus estimates for revenue and EPS for each of the past four quarters, which is great to see.
TENB shares have risen 1.2% over the past six months and 6% over the past year, closing the last trading session at $41.87.
TENB's positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
The stock receives an A for Growth and a B for Quality. In the B-rated Software – Security industry, TENB is ranked 6th out of 22 stocks.
To access additional ratings for TENB (Value, Sentiment, Stability and Momentum), click here.
Brand 2: Trend Micro Inc. (TMICY)
Headquartered in Tokyo, TMICY develops and sells computer security software and related services both in Japan and overseas, including the Vision One platform, Attack Surface Management, Extended Detection and Response, Cloud Security, Endpoint Security, Network Security, Email Security, OT/ICS Security, and Threat Intelligence.
On May 1, TMICY released important AI-powered additions to its platform to help secure the use of AI in organizations and better manage the risks associated with the mass adoption of new AI tools. The latest platform updates aim to bring new efficiencies to security teams and provide important guidelines for the use of AI.
Zero Trust Secure Access, a new element of Trend Vision One™, extends TMICY's leadership as the first vendor to prioritize the security of AI services and the people who use them across the enterprise.
On April 22, TMICY launched AI-driven cyber risk management capabilities across its flagship platform, Trend Vision One™, which seamlessly integrates technology categories across more than 10 industries into a single service, empowering security, cloud and IT operations teams to proactively manage risk.
For the first quarter ended March 31, 2024, TMICY's net sales increased 12.3% year-over-year to 65.93 billion yen ($420.09 million). Gross profit increased 12.6% year-over-year to 49.91 billion yen ($318.03 million). Operating profit increased 27% year-over-year to 12.13 billion yen ($77.27 million).
Additionally, the company's net income came in at 10.75 billion yen ($68.52 million), or 78.83 yen per share, up 68.7% and 72%, respectively, from the same period last year.
Forecasts for fiscal 2024 call for sales of 271 billion yen ($1.73 billion) and operating profit of 52.9 billion yen ($337.06 million), with net income attributable to TMICY's parent company shareholders expected to reach 34.6 billion yen ($220.46 million) and earnings per share of 255.05 yen.
Analysts expect TMICY's third quarter (ending September 2024) revenue to grow 3.4% year-over-year to $438.5 million and EPS to increase 907.1% year-over-year to $0.50 for the quarter. Additionally, the company's fiscal 2024 revenue and EPS are expected to grow 209.6% year-over-year to $1.71 billion and 228.1% year-over-year to $1.71.
The company's shares have risen 7.8% over the past nine months, closing at $45.60 in the last trading session.
TMICY's POWR Ratings reflect the company's positive outlook: The stock has an overall rating of B, which equates to a “Buy” in our proprietary rating system.
TMICY has a grade of B for Quality, Value and Stability, ranking it #3 out of 22 stocks in the B-Grade Software – Security industry.
To see more sentiment, growth and momentum ratings for TMICY click here.
Stock No. 1: Radware Inc. (RDWR)
Based in Tel Aviv, Israel, RDWR develops, manufactures and sells cyber security and application delivery solutions for cloud, on-premise and software defined datacenters worldwide. The company operates through two segments: its core Radware business and The Hawks business.
On May 14, RDWR signed a managed security services provider agreement with Lightpath, an all-fiber infrastructure-based connectivity provider. Through this agreement, Lightpath will leverage RDWR's AI-powered DefensePro® DDoS Protection to offer customers DDoS scrubbing services designed to combat increasingly complex threats.
MotivationWorks Inc. Selects RDWR's Cloud Web Application Firewall (WAF) and Emergency Response Team Services April 17. MotivationWorks selected RDWR to improve the security and availability of its cloud services and combat the surge in increasingly sophisticated web DDoS attacks.
Also today, RDWR announced a new AI-powered, rules-free version of its DNS DDoS protection solution. Powered by RDWR's patented algorithms, this enhanced version is designed to automatically distinguish between legitimate and attack traffic and instantly adapt DDoS defenses based on specific attackers.
For the first quarter ended March 31, 2024, RDWR reported revenue of $65.08 million and non-GAAP gross profit of $53.34 million. The company's non-GAAP net income and EPS were $6.83 million and $0.16, respectively, up 12.2% and 14.3% year over year.
Furthermore, the company's total assets will be $587.21 million as of March 31, 2024, compared to $571.92 million as of December 31, 2023.
The Street expects RDWR's second-quarter (ending June 2024) EPS to increase 61.2% year over year to $0.16. The company's current-quarter revenue is expected to increase 0.6% year over year to $65.99 million. For fiscal 2024, the company's revenue and EPS are expected to increase 1.2% year over year to $264.38 million and 65% year over year to $0.71, respectively.
RDWR shares have risen 19.7% over the past month and 32.3% over the past six months, closing the last trading session at $20.18.
RDWR's sound fundamentals are reflected in its POWR Ratings: the stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
RDWR receives an A for Quality and a B for Sentiment and Growth, ranking it #2 out of 22 stocks in its industry.
In addition to the POWR Ratings above, there are also RDWR Value, Momentum, and Stability Ratings. All RDWR Ratings are available here.
What next?
Get our special report highlighting three low-priced companies with big upside potential in today's volatile market.
3 Stocks That Will Double This Year >
TMICY shares were trading at $45.60 per share on Friday morning, up $0.49 (+1.10%). Year-to-date, TMICY is down -14.57%, while the benchmark S&P 500 index has risen 10.37% during the same period.
About the author: Rjkumari Saxena
Rajkumari started her career as a writer but slowly shifted her focus to financial journalism, leveraging her educational background in commerce. Fascinated by the interplay of business and economic changes in stocks, she aims to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to provide investors with insights that lead to profitable decisions. Read more…
