Taken together, recent events demonstrate just how important cybersecurity is. For example, consider: AT&T (New York Stock Exchange:T) A hack that happened a few weeks ago. Although just a single event, this is the one that sparked the demand for cybersecurity, and I wouldn't be surprised if more unique events had a similar impact.
Systematically speaking, cybersecurity is set for a long-term growth trajectory. The industry end market is expected to grow by 11.44% annually until 2029. Additionally, a number of cybersecurity platforms are exiting the beta stage, providing monetization opportunities for the industry.
Despite the appeal of cybersecurity as an industry, its volatility makes it difficult to pick winning stocks. So I dialed into its constituents to find best-in-class assets.
With all that in mind, here are three cybersecurity stocks to watch.
CrowdStrike Holdings (CRWD)
Source: T. Schneider / Shutterstock.com
cloud strike (NASDAQ:CRWD) is a growing cybersecurity company offering a wide range of workload and endpoint security, threat intelligence, and cyber attack response services.
The company has experienced rapid growth due to its high quality yet affordable products and services. CrowdStirke's fourth quarter financial results convey this fact as its subscription revenue settled at his $795.95 million, up 33% year over year. Additionally, CrowdStrike delivered his $49.39 million in service revenue for the quarter. We believe the company's services division may be undervalued as the AI boom increases demand for integrated services.
Additionally, CrowdStrike has solid quantitative metrics. For example, CrowdStrike has a free cash flow margin of 32.75% and a five-year compound annual growth rate (CAGR) of 65%.
Essentially, CRWD stock is a long-term growth opportunity. Do not miss it!
CyberArk Software (CYBR)
Source: photobyphm / Shutterstock.com
cyber ark (NASDAQ:cyber-) Stocks are a momentum play. Actually, these are not my own words. wells fargo (New York Stock Exchange:W.F.C.) recently screened momentum stocks with a bullish trajectory and added CyberArk to the list.
Wells Fargo's Chris Harvey thinks stocks like CyberArk could benefit from sustained momentum from market-based anomalies. I agree with Mr. Harvey's outlook, as long-term growth technology stocks are likely to outperform the market unless significant structural cracks emerge within the economy. Additionally, Cyber Ark has experienced solid growth as evidenced by his 5-year CAGR of 16.98% and his stellar leveraged free cash flow margin of 14.19%.
Take advantage of CyberArk's unique features to add breadth to your analysis.
CyberArk, which provides identity management to a variety of sectors, released its fourth quarter earnings report in February. The company beat its revenue target by $13.36 million and beat its per-share earnings target by 34 cents, a win. Additionally, Cyber Ark reports that annual recurring revenue is $582 million, an increase of 60% year over year, suggesting market share expansion is underway.
While the fundamentals are certainly strong, is CYBR stock undervalued? CYBR stock has a price-to-sales ratio of 14.72x, which is higher than the five-year average of 11.04x. Therefore, it is wrong to suggest relative value. However, we think we are looking at a quality growth strategy, and it is based on CyberArk's fundamentals and trending behavior (CYBR stock has a 10-day, 50-day, 100-day, 200 trading above the daily moving average).
Okta Co., Ltd. (OKTA)
Source: Poetra.RH / Shutterstock.com
Octa (NASDAQ:Octa) is primarily a business-to-business identity protection company. The company has spent most of his 15 years building a product pipeline, but has been financially successful in recent years.
OKTA stock has soared nearly 20% in the past month. Many people have suggested the following upgrades: american bank (New York Stock Exchange:BAC) delivered impressive month-over-month performance. A major U.S. bank upgraded the stock from “underperform” to “buy” and set a price target of $135.
I agree with Bank of America's outlook, as Okta's latest financial results show solid growth. For example, in Okta's fourth quarter results, his 20% increase in subscription revenue brought revenue to his $605 million, a 19% increase year over year. Additionally, Okta's non-GAAP operating income settled at $129 million, which translates to a gross margin of approximately 21%.
Many of Okta's tailwinds are systemic. Nevertheless, the company has a number of differentiating factors. One of them is Okta, a cloud-based identity management platform that integrates with more than 7,000 applications for scalability. Additionally, Okta's strong revenue base gives it the freedom it needs to expand into emerging markets (EM). Start-ups have the potential for revenue diversification and scalability.
To conclude, let's take a look at the valuation metrics for OKTA stock.
OKTA's price-to-earnings ratio (P/E) is 1.65x, which is lower than the sector average of 1.95x. Additionally, OKTA's put/call ratio is 0.52x, indicating optimism in the options market.
On the date of publication, Steve Booyens did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are subject to InvestorPlace.com Publishing Guidelines..
