Top Cybersecurity Stocks to Consider in July 2024

3 Top Cybersecurity Stocks to Buy in July | The Motley Fool

These companies are positioned to protect the growing digital world. The world is becoming increasingly digitally connected. Smartphones make cross-globe communication possible with a few taps, companies embracing employees working from home means more information is shared via remote networks, and cloud services are a major part of everyday operations for many major companies. These developments help connect the world and increase efficiency, but the downside is increased cyberattack opportunities. The lasting effects of cyberattacks shouldn't be taken lightly, either. The most obvious cost is the money a company spends recovering from a breach or enhancing its security measures, but there's also the reputational damage that can come from customers losing confidence in a company's ability to keep their private information safe. The good news is that these increased cyberthreats have made the cybersecurity industry virtually indispensable, and the industry's growth potential is immense. For investors looking to get in on the bustling industry, the following three companies are well worth considering. While most cybersecurity companies are software-based, Cisco Systems (CSCO 0.23%) plays a different role by providing critical hardware. Cisco is admittedly trying to shift away from relying on hardware to focus more on software, but its hardware still plays an important role in cybersecurity. The company creates threat detection devices, secure access services, and network security appliances, all of which defend against cyberthreats. The company's revenue has taken a hit as customers have been keeping their existing hardware in use longer, but the transition to focus more on software and subscriptions should help with this issue down the road. In Cisco's latest quarter, subscription revenue of $6.9 billion accounted for 54% of total revenue and its ARR was up 22% year over year. Cisco's $28 billion acquisition this year of Splunk, a software company specializing in data analytics and cybersecurity, is an encouraging sign of the company's direction. It says the acquisition should put it in a position to be a key part of the AI revolution by protecting critical infrastructure. Alphabet (GOOG -3.97%) (GOOGL -4.00%) is widely known for the Google search and advertising business, but it also provides cybersecurity solutions. A large part of why I chose Alphabet for this list is because of the talks it was reportedly in to buy cybersecurity start-up Wiz for around $23 billion (which would have been its largest acquisition ever). Wiz provides cloud-based cybersecurity solutions powered by AI, and the deal would've been a key move in Alphabet boosting its Google Cloud security offerings. Wiz has since reportedly rejected Alphabet's offer, but the move shows that Alphabet is serious about boosting its cybersecurity offerings and isn't afraid to spend big to make it happen. The cloud computing industry is rapidly growing, but Google Cloud lags behind Amazon Web Services (AWS) and Microsoft Azure. Although Google Cloud has had impressive growth (revenue was up 28% year over year last quarter), its market share is just 11%. As Alphabet seeks to proactively enhance its cybersecurity capabilities, Google Cloud will become a much more attractive product for companies that need airtight security solutions. It won't happen overnight, but the cloud business is still relatively early in its potential. If Alphabet wants to close the gap, prioritizing its cybersecurity offerings is a great way to pick up momentum and become a serious player in the cybersecurity space. CrowdStrike (CRWD 0.60%) has been the subject of much scrutiny after causing arguably the worst global IT outage ever. The outage last week, which CrowdStrike said happened during a software update, rattled many industries, and many companies are still dealing with the effects. This caused the stock to plunge, losing around a quarter of its value in just a few days. Still, the company's long-term prospects remain strong. Before the outage incident, investors had taken a liking to CrowdStrike, with the stock up more than 130% in the past 12 months before the recent sell-off. It's now up "only" around 80% in that time, which is still impressive. CrowdStrike has attracted the business of many top companies globally. It's the cloud security provider for 62 companies in the Fortune 100, showing its ability to attract and retain major enterprises (which come with large checkbooks). The recent blunder may be a black cloud over CrowdStrike, but it's hard to see companies jumping ship as the incident wasn't caused by a successful cyberattack or anything that would call into question CrowdStrike's cybersecurity effectiveness. At the end of the first quarter of its 2025 fiscal year (ended April 30), CrowdStrike noted that 65% of its customers use five or more modules, 44% use six or more and 28% use seven or more. Meanwhile, the number that use eight or more modules had increased 95% year over year. CrowdStrike has also been putting up encouraging financials along with its impressive customer adoption. The company ended its latest quarter with $3.64 billion in annual recurring revenue (ARR), up 33% year over year, and its operating income (profit from its core operating) grew 72% year over year to $199 million. Add in its impressive free-cash-flow growth, and CrowdStrike is showing strong financial health. CrowdStrike predicts the total addressable market (TAM) for AI-native security platforms will increase from $100 billion this year to $225 billion by 2028. Whether it reaches this point remains to be seen -- and investors will want to keep an eye on fallout from the IT outage -- but there's no denying the market for CrowdStrike is growing, and it is in a great position to capitalize on the expansion.

Forget CrowdStrike: 3 Cybersecurity Stocks to Buy Instead | The Motley Fool

Zscaler, SentinelOne, and Palo Alto Networks might be more promising plays right now. CrowdStrike's (CRWD 1.88%) stock price tumbled 11% on July 19 after the cybersecurity company's flawed software update for Windows PCs sparked a global IT outage across banks, airports, hospitals, government agencies, retailers, and other businesses. The company says it's already identified the issue and is in the process of rolling back the disastrous update, but it's still too early to assess the long-term damage to its business and brand. This seems like a black swan event for CrowdStrike, one of the cybersecurity sector's fastest-growing companies. Its revenue rose at a compound annual growth rate (CAGR) of 65% from fiscal 2019 to fiscal 2024 (which ended this January), its stock surged 265% over the past five years, and it now serves about 60% of the Fortune 500 companies. CrowdStrike should eventually recover and keep growing as its cloud-native endpoint security platform replaces more on-site appliances. But its stock isn't cheap at 19 times this year's sales, and analysts will likely rein in their near-term forecasts. So instead of wondering if CrowdStrike can right its ship without hitting another iceberg, you might instead consider investing in three of its peers: Zscaler (ZS 1.41%), Palo Alto Networks (PANW 0.56%), and SentinelOne (S 5.39%). Zscaler, like CrowdStrike, is a cloud-native cybersecurity company that doesn't install any on-site appliances. But instead of offering a wide range of security services like CrowdStrike, Zscaler mainly provides "zero-trust" services that treat everyone as a potential threat. That approach can stop internal threats like corporate spies and disgruntled employees. According to Fortune Business Insights, the global zero-trust market could still grow at a CAGR of 17% from 2023 to 2030. Zscaler went public in 2018, and its revenue rose at a CAGR of 52% from fiscal 2019 to fiscal 2023 (which ended last July). Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also grew at a CAGR of 70%. Like many of its peers, Zscaler has been struggling with slower growth as the macro headwinds made it harder to acquire new customers. But from fiscal 2023 to fiscal 2026, analysts still expect its revenue to grow at a CAGR of 26% as its adjusted EBITDA increases at a CAGR of 40%. Based on those expectations, its stock doesn't look that expensive at 13 times this year's sales and 56 times its adjusted EBITDA. SentinelOne aims to disrupt the cybersecurity market with its Singularity extended detection and response (XDR) platform. The company claims Singularity's AI algorithms can completely replace teams of human analysts. That's a bold claim, but SentinelOne has grown like a weed since its public debut in 2021. From fiscal 2022 to fiscal 2024 (which ended this January), its revenue rose at a CAGR of 74%. However, its stock has declined nearly 40% below its initial public offering (IPO) price of $35 as the macro and competitive headwinds throttled its near-term growth. Analysts still expect its revenue to rise at a CAGR of 27% from fiscal 2024 to fiscal 2027 as the macro environment warms up and it expands Singularity's ecosystem. They also expect its adjusted EBITDA to finally turn positive in fiscal 2026. SentinelOne is still a speculative play, but it looks reasonably valued at 7 times this year's sales. Palo Alto Networks started out as a provider of next-gen firewalls, which added more network filters to traditional firewalls. Today, those on-site firewalls serve as the foundation of its Strata network security platform. However, Palo Alto also provides cloud-based services through its Prisma platform along with AI-powered threat detection tools on its Cortex platform. Most of its growth has been driven by Prisma and Cortex, which it refers to collectively as its "next-gen security" (NGS) services. Palo Alto went public in 2012, and its revenue grew at a CAGR of 35% from fiscal 2012 to fiscal 2023 (which ended in July 2023). It now serves more than 80,000 enterprise customers as one of the largest cybersecurity companies in the world. Its growth also slowed down as it faced tougher macro challenges over the past year, but that deceleration was exacerbated by a "platformization strategy" driven by free trials and deferred revenue deals for some of its newer services. But from fiscal 2023 to fiscal 2026, analysts still expect Palo Alto's revenue to grow at a CAGR of 16% as its earnings per share rises at a CAGR of 49% on a generally accepted accounting principles (GAAP) basis. It might seem a bit pricey at more than 50 times its forward adjusted earnings, but its scale, diversification, and rising profits arguably justify that higher valuation.

Forget CrowdStrike: 3 Cybersecurity Stocks to Buy Instead

CrowdStrike's (NASDAQ: CRWD) stock price tumbled 11% on July 19 after the cybersecurity company's flawed software update for Windows PCs sparked a global IT outage across banks, airports, hospitals, government agencies, retailers, and other businesses. The company says it's already identified the issue and is in the process of rolling back the disastrous update, but it's still too early to assess the long-term damage to its business and brand. This seems like a black swan event for CrowdStrike, one of the cybersecurity sector's fastest-growing companies. Its revenue rose at a compound annual growth rate (CAGR) of 65% from fiscal 2019 to fiscal 2024 (which ended this January), its stock surged 265% over the past five years, and it now serves about 60% of the Fortune 500 companies. Image source: Getty Images. CrowdStrike should eventually recover and keep growing as its cloud-native endpoint security platform replaces more on-site appliances. But its stock isn't cheap at 19 times this year's sales, and analysts will likely rein in their near-term forecasts. So instead of wondering if CrowdStrike can right its ship without hitting another iceberg, you might instead consider investing in three of its peers: Zscaler (NASDAQ: ZS), Palo Alto Networks (NASDAQ: PANW), and SentinelOne (NYSE: S). 1. Zscaler Zscaler, like CrowdStrike, is a cloud-native cybersecurity company that doesn't install any on-site appliances. But instead of offering a wide range of security services like CrowdStrike, Zscaler mainly provides "zero-trust" services that treat everyone as a potential threat. That approach can stop internal threats like corporate spies and disgruntled employees. According to Fortune Business Insights, the global zero-trust market could still grow at a CAGR of 17% from 2023 to 2030. Zscaler went public in 2018, and its revenue rose at a CAGR of 52% from fiscal 2019 to fiscal 2023 (which ended last July). Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also grew at a CAGR of 70%. Like many of its peers, Zscaler has been struggling with slower growth as the macro headwinds made it harder to acquire new customers. But from fiscal 2023 to fiscal 2026, analysts still expect its revenue to grow at a CAGR of 26% as its adjusted EBITDA increases at a CAGR of 40%. Based on those expectations, its stock doesn't look that expensive at 13 times this year's sales and 56 times its adjusted EBITDA. 2. SentinelOne SentinelOne aims to disrupt the cybersecurity market with its Singularity extended detection and response (XDR) platform. The company claims Singularity's AI algorithms can completely replace teams of human analysts. That's a bold claim, but SentinelOne has grown like a weed since its public debut in 2021. From fiscal 2022 to fiscal 2024 (which ended this January), its revenue rose at a CAGR of 74%. However, its stock has declined nearly 40% below its initial public offering (IPO) price of $35 as the macro and competitive headwinds throttled its near-term growth. Analysts still expect its revenue to rise at a CAGR of 27% from fiscal 2024 to fiscal 2027 as the macro environment warms up and it expands Singularity's ecosystem. They also expect its adjusted EBITDA to finally turn positive in fiscal 2026. SentinelOne is still a speculative play, but it looks reasonably valued at 7 times this year's sales. 3. Palo Alto Networks Palo Alto Networks started out as a provider of next-gen firewalls, which added more network filters to traditional firewalls. Today, those on-site firewalls serve as the foundation of its Strata network security platform. However, Palo Alto also provides cloud-based services through its Prisma platform along with AI-powered threat detection tools on its Cortex platform. Most of its growth has been driven by Prisma and Cortex, which it refers to collectively as its "next-gen security" (NGS) services. Palo Alto went public in 2012, and its revenue grew at a CAGR of 35% from fiscal 2012 to fiscal 2023 (which ended in July 2023). It now serves more than 80,000 enterprise customers as one of the largest cybersecurity companies in the world. Its growth also slowed down as it faced tougher macro challenges over the past year, but that deceleration was exacerbated by a "platformization strategy" driven by free trials and deferred revenue deals for some of its newer services. But from fiscal 2023 to fiscal 2026, analysts still expect Palo Alto's revenue to grow at a CAGR of 16% as its earnings per share rises at a CAGR of 49% on a generally accepted accounting principles (GAAP) basis. It might seem a bit pricey at more than 50 times its forward adjusted earnings, but its scale, diversification, and rising profits arguably justify that higher valuation. Should you invest $1,000 in CrowdStrike right now? Before you buy stock in CrowdStrike, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and CrowdStrike wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $757,001!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Leo Sun has positions in CrowdStrike and Palo Alto Networks. The Motley Fool has positions in and recommends CrowdStrike, Palo Alto Networks, and Zscaler. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.