In the era of advancements driven by digitalization and artificial intelligence (AI), cybersecurity has become increasingly important for businesses around the world. The cybersecurity industry has seen consistent healthy growth over the past few years as the number and complexity of cyber threats increases. Additionally, cybersecurity has evolved into a persistent concern, as companies are unwilling to compromise on digital defenses in favor of cost-cutting measures.
This resiliency explains why Gartner predicts global cybersecurity spending will increase 14.3% this year to $215 billion. In the long term, the global cybersecurity market is expected to expand at a CAGR of 13.8% and reach $424.97 billion by 2030.
Against this backdrop, cybersecurity stocks such as Zscaler Inc. (ZS), CrowdStrike Holdings, Inc. (CRWD), and Tenable Holdings Inc. (TENB) have all had exceptional market performance, beating the Wall Street consensus. It has received a “strong buy” rating. Might be worth considering. Let's take a closer look.
Cybersecurity Stock #1: Zscaler (ZS)
Zscaler, Inc. (ZS) is a cloud-based internet security platform headquartered in San Jose. It is valued at $27.3 billion in market capitalization and is one of the leading developers of zero trust technology that prevents hackers from gaining access to corporate networks. Zscaler is ideal for defending against the growing threats emerging from generative AI.
ZS stock has gained 80.9% over the past 52 weeks, significantly outpacing the S&P 500 Index's ($SPX) gain of 26.7%.
Zscaler's price-to-book ratio is 29.72x, more than 30% lower than the company's five-year average. However, its price/sales multiple of 17.27x is much higher than his Information Technology sector average of 3.05x.
In its fiscal second quarter earnings report released on February 29, Zscaler's revenue rose 35% year over year to $525 million, beating Wall Street expectations by 3.6%. Adjusted net income per share of $0.76 also exceeded analyst expectations by 31%. Free cash flow margin for the quarter reached a record high of 19%.
Zscaler's customer base has grown to 7,700 companies and includes 40% of the Fortune 500 companies. Additionally, approximately 2,820 customers spend at least $100,000 annually on his Zscaler platform, an increase of 21% year over year. In the second quarter, the number of customers who spent more than $1 million also increased by 31.5%.
The company expects fiscal 2024 revenue to be between $2,118 million and $2,122 million, and non-GAAP net income per share in the range of $2.73 to $2.77. ZS has an overall consensus rating of Strong Buy. Of the 36 analysts covering ZS stock, 27 recommend a “strong buy,” one recommends a “moderate buy,” and eight recommend a “hold.”
The average Zscaler analyst price target is $255.06, indicating 39.1% upside potential. The high price target of $310 suggests 69% upside potential.
Cybersecurity Stock #2: CrowdStrike Holdings (CRWD)
CrowdStrike Holdings, Inc. (CRWD), headquartered in Austin, Texas, is the world's leading cybersecurity company revolutionizing security with its advanced cloud-native platform. Powered by AI and the CrowdStrike Security Cloud, the CrowdStrike Falcon platform ensures real-time attack detection, automated protection, and rapid deployment, reducing complexity and delivering immediate value. The current market capitalization is $74.7 billion.
CRWD stock has increased 146.8% over the past 52 weeks, significantly outperforming the S&P 500 Index.
The company's stock is currently trading at a forward P/E ratio of 285.13, significantly outperforming its closest peers. However, the price to cash flow ratio is 153.75, which is cheap compared to his five-year average of 196.08.
The company's 31.4% year-to-date gain is due in part to CrowdStrike's strong performance, with revenue beating Wall Street expectations. Total revenue for the quarter increased 33% year-over-year to $845.3 million, beating the consensus estimate of $840 million. Annual recurring revenue increased to $281.9 million. The company's non-GAAP net income more than doubled to $236.21 million, or $0.95 per share, compared to Wall Street estimates of $0.82 per share.
CrowdStrike expects strong demand to continue in fiscal 2025, with management forecasting revenue in the range of $3.92 billion to $3.98 billion, an increase of approximately It reflects a growth of 28% to 30%. Non-GAAP EPS is expected to be in the range of $3.77 to $3.97.
Analysts tracking CrowdStrike expect EPS to increase 124% in fiscal 2025 and 59.8% in fiscal 2026.
CRWD has an overall consensus rating of Strong Buy. Of the 40 analysts covering the stock, 35 have recommended a “strong buy,” three have recommended a “moderate buy,” and two have recommended a “hold.”
CrowdStrike's average analyst price target is $391.20, indicating 24% upside potential. The high price target of $435 suggests 37.8% upside potential.
Cybersecurity Stock #3: Tenable Holdings (TENB)
Tenable Holdings, Inc. (TENB), based in Columbia, Maryland, specializes in exposure management solutions that help businesses gain visibility into their vulnerabilities and security issues. Tenable Holdings uses Nessus, the cybersecurity industry's most widely used vulnerability management tool, to proactively scan cloud networks, operating systems, and devices to identify vulnerabilities and identify them before they can be exploited. Apply patches in a timely manner. It has a market capitalization of $5.6 billion.
TENB stock has returned 7.4% over the past 52 weeks and 4.9% year-to-date.
Tenable Holdings' stock trades at 7.07 times sales, about 15% below the five-year average for itself and its recent peers.
Tenable reported better-than-expected fourth-quarter results on February 6th. Fourth-quarter sales rose 16% year over year to $213.3 million, beating Wall Street expectations by 3.1%. Non-GAAP net income more than doubled to $30.16 million, or $0.25 per share. Wall Street's expectations were for $0.14 per share.
The company projects fiscal 2024 sales of $895 million to $905 million and non-GAAP EPS in the range of $1.03 to $1.10, with potential for further growth. I'm emphasizing it.
TENB has a consensus rating of “Strong Buy” on Wall Street. Of the 18 analysts covering TENB, 15 recommend a “strong buy,” one recommends a “moderate buy,” and two recommend a “hold.”
The average analyst price target for Tenable Holdings is $57.60, suggesting upside potential of 19.2%. Wedbush set a high price target of $65 in February, suggesting a potential upside of 34.5% over the next 12 months.
On the date of publication, Sristi Suman Jayaswal did not have (directly or indirectly) any positions in any securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
