Cybersecurity companies are generally resilient to economic downturns because their clients don't shut down their digital defenses to save a few bucks. Increasingly complex cyberattacks will cause more businesses to strengthen their defenses.
However, it can be difficult for investors to find the best long-term strategy in the fragmented cybersecurity space. So today we will review his three simple initiatives in this growing market. microsoft (NASDAQ:MSFT), cloudflare (NYSE:Net)and Z scaler (NASDAQ:ZS) — and explain why they're still a solid investment.
1.Microsoft
Most investors may not think of Microsoft as a cybersecurity company, since it derives most of its revenue from its cloud-based services, Windows OS, and Xbox gaming products. However, its vast ecosystem also serves as a springboard for Microsoft's growing portfolio of first-party cybersecurity tools.
Microsoft's software has been circumvented by a series of hacks in recent years, but the company has acquired a long list of cybersecurity companies, upgraded its Windows antivirus software Defender, and announced a cybersecurity investment three years ago. We are plugging those holes by securing $20 billion for the The company then entered the network security market with its proprietary Entra identity management, edge networking, and network access services for the Azure cloud infrastructure platform.
The need for third-party cybersecurity services could decrease over time as Microsoft addresses recent hacks, continues to acquire smaller cybersecurity companies, and upgrades its own tools with OpenAI's integrated generative AI tools. There is sex. That could make Microsoft a balanced investment vehicle for long-term growth in the cloud, enterprise software, AI, gaming, and cybersecurity markets. Analysts expect the company's earnings to rise 11% in fiscal 2024 (ending in June this year) and 15% in fiscal 2025, putting the stock in line with peers at a forward P/E of 31x. Still looks like a reasonable value in comparison.
2. Cloudflare
Cloudflare's cloud-based content delivery network (CDN) accelerates the delivery of digital photos, videos, and other content for websites and apps. This is achieved by storing cached copies of digital content on edge servers. Edge servers are physically closer to your users than origin servers.
Cloudflare may not sound like a cybersecurity company, but its CDN blocks websites from bot-based attacks. If you've ever been asked to prove you're a human before accessing a website, you've probably encountered that defense. Cloudflare claims that this approach, often likened to the Internet's “water filtration” system, will gradually reduce the need for traditional cybersecurity services.
From 2019 to 2023, Cloudflare's revenue grew at a compound annual growth rate (CAGR) of 46%. Analysts expect the company's revenue to continue to grow at a CAGR of 28% from 2023 to 2026 as it continues to connect more websites to its platform.
Cloudflare's stock price is not cheap at 18 times this year's sales, and the company is not yet profitable on a generally accepted accounting principles (GAAP) basis. Nevertheless, with the rise of more media-intensive websites, faster internet speeds, and more destructive bot-based attacks, more companies are adopting his CDN services and earning long-term revenue. May promote growth.
3. Zscaler
Zscaler offers a “zero trust” service that tags everyone, including company executives, as a potential threat. But unlike many of its peers who install these tools through on-site appliances, Zscaler offers its services only through cloud-native subscriptions that require no hardware installation.
This streamlined approach is more consistent, cheaper, and easier to scale as your organization grows. From FY2019 to FY2023 (ended last July), revenue grew at a CAGR of 52%. Analysts expect the company's sales to grow at a CAGR of 27% from FY2023 to FY2026, even as near-term macro headwinds make it difficult to attract new customers.
In the company's latest conference call, CEO Jay Chaudhry said he was not under “significant pressure” regarding large deals and that Zero Trust remains “a top priority” for many companies. ”. However, like Cloudflare, Zscaler is not yet profitable on a GAAP basis. Furthermore, the company's stock price is nearly 13 times this year's sales, making it not exactly a bargain.
However, Zscaler still has a lot of room to grow. According to Fortune Business Insights, the global zero trust market is likely to expand at a CAGR of 17% from 2023 to 2030, with Zscaler outpacing its peers to lock in more customers to its cloud. may continue to grow at an even faster pace. Native subscription.
Where to invest $1,000 right now
When our analyst team has information about a stock, it's worth listening to. After all, the newsletter they've been running for 20 years is Motley Fool Stock Advisorhas more than tripled its market. *
they just made it clear what they believe Best 10 stocks Microsoft made the list of stocks that investors should buy right now, but there are nine others you may have overlooked.
See 10 stocks
*Stock Advisor will return as of April 22, 2024
Leo Sun has no position in any stocks mentioned. The Motley Fool has positions in and recommends Cloudflare, Microsoft, and Zscaler. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
3 Top Cybersecurity Stocks to Buy in April originally published by The Motley Fool
