Best Cybersecurity Stocks to Consider in 2024
The cybersecurity sector continues to attract substantial investor interest, driven by the increasing need for robust security solutions in an era marked by rapid digitization and escalating cyber threats. This article explores some of the top cybersecurity stocks that could potentially offer significant returns in 2024, based on Wall Street's perspectives.
Zscaler (NASDAQ: ZS)
Overview
Zscaler is a leading player in the cybersecurity space, specializing in cloud security solutions. Despite facing pressures from heightened competition and a cautious spending environment, Zscaler has consistently delivered strong financial performance.
Key Metrics
- Calculated Billings: Grew 27% year-over-year to $627.6 million in Q2 FY24.
- Customer Base: Added 112 customers with $100,000 annual recurring revenue (ARR), totaling 2,820 customers.
- Retention Rate: 12-month trailing dollar-based net retention rate stands at 117%.
Analyst Opinions
Jefferies analyst Joseph Gallo maintains a Buy rating with a price target of $275, citing Zscaler's potential to outperform due to its large market opportunity and strong enterprise and federal exposure. Despite recent stock underperformance and competition concerns in the Secure Access Service Edge (SASE) space, analysts remain optimistic about Zscaler's long-term prospects.
Fortinet (NASDAQ: FTNT)
Overview
Fortinet is renowned for its comprehensive security fabric and high-performance network security solutions. The company has shown resilience amid challenges such as subdued enterprise spending and rising competition.
Key Metrics
- Revenue: Increased 7% to $1.35 billion in Q1 2024.
- Adjusted EPS: Grew 26.5% year-over-year to $0.43.
- Billings: Experienced a 6.4% decline to $1.41 billion in Q1 2024, with expectations of improvement in the latter half of the year.
Analyst Opinions
Morgan Stanley analyst Hamza Fodderwala recently lowered the price target to $73 from $81 but reiterated a Buy rating. Fodderwala expects improved growth trends in the second half of the year, predicting that Q1 was the trough. Fortinet’s focus on unified SASE and Secure Operation markets is seen as a strategic move to enhance its competitive position.
Palo Alto Networks (NASDAQ: PANW)
Overview
Palo Alto Networks is a leader in cybersecurity solutions, emphasizing a consolidated platform approach to meet diverse security needs. The company has made significant strides in addressing the demand for integrated security solutions.
Key Metrics
- Q3 FY24 Expectations: Analysts project EPS growth of 20% to $1.25 and revenue increase of over 14% to $1.97 billion.
- Strategic Focus: Transitioning to a “platformization” strategy aimed at achieving $15 billion in revenue from next-generation security products by Fiscal 2030.
Analyst Opinions
Evercore analyst Peter Levine lowered his price target to $385 from $405 and placed PANW on the firm's "Tactical Underperform" list ahead of Q3 results. Despite some near-term caution, the long-term outlook remains positive, with Palo Alto expected to maintain its dominant position in the cybersecurity market.
Conclusion
Among these three prominent cybersecurity stocks, Zscaler appears to offer the highest potential upside, with Wall Street analysts particularly bullish on its growth prospects. Fortinet and Palo Alto Networks also present compelling investment opportunities, each with strategic initiatives poised to capitalize on the evolving cybersecurity landscape.Investors should consider these stocks based on their specific risk tolerance and investment goals, keeping in mind the dynamic nature of the cybersecurity industry.
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