In the wake of the Russian invasion of Ukraine, cybersecurity risks have been elevated around the globe and spending in the sector has been ramping up as a result. According to the International Data Corporation, global security spending will hit $219 billion in 2023 and then grow to almost $300 billion by 2026.
Just having a modest piece of this ever-expanding pie could pay off big time for tech companies in the years ahead. And with many of the leading cybersecurity stocks riding strong momentum in 2023, now may be the time for growth-oriented investors to carve out a position in this corner of Wall Street.
The following seven stocks are all cybersecurity stocks to consider right now based on their scale, growth or share price momentum:
Technically a chipmaker in the semiconductor industry rather than engaging in software and technology services like most cyber stocks, Broadcom is a stock to watch after it acquired cybersecurity firm Symantec in 2019 to supplement its existing mainframe security offerings. According to its 2022 annual report, about 22% of its revenue comes from this security segment – but more importantly, about $5.2 billion of its $14.2 billion in total operating income is derived from cybersecurity.
Investors looking for a dedicated play on cyber may be better served by one of the different companies out there, but those looking for scale and diversification may like what they see in this $340 billion tech leader.
Check Point Software Technologies Ltd. (CHKP)
Check Point is a unique name on this list because it’s based in Israel instead of Silicon Valley. Its business is familiar, however, and the value of its services is clear. As its name implies, Check Point is a network infrastructure company that offers security gateways and software platforms for businesses that help manage their internal networks, applications and data loads.
Admittedly, the revenue growth projections for CHKP aren’t quite as robust as some of the rapidly expanding picks on this list, but it is soundly profitable and trades for a reasonable valuation at just 14 times forward earnings, and has been far less volatile over the past five years. That may be a mark in its favor for investors looking to avoid smaller all-or-nothing startups.
Cisco Systems Inc. (CSCO)
One of the largest enterprise technology stocks on the planet, the $200 billion Cisco is also a major player in cybersecurity. According to corporate literature, its solutions protect 840,000 networks, 67 million mailboxes and 87 million customer endpoints worldwide.
About 70% of CSCO revenue comes from either its “end-to-end security” or its dominant “secure, agile networks” segments, so the performance of Cisco’s cyber biz is definitely material to the performance of its stock. And with about $20 billion in cash and investments on its books, it’s also primed for big moves if a smaller company looks like an attractive acquisition target.
CrowdStrike Holdings Inc. (CRWD)
At nearly $40 billion in market value, CrowdStrike is a leading name in the cybersecurity sector that has been quite volatile in recent years – beginning trading in the $60 range after its 2019 IPO, before racing up to almost $100 and then crashing below $40 at its pandemic low. Individual shares are currently priced at about $150, so you’d be sitting on a pretty penny if you invested during 2020 – but considering shares are down from their all-time high of nearly $300 a share in late 2021, timing is definitely everything in this cybersecurity stock.
Behind the big swings is a growth story that continues to attract investors, though, with predicted revenue growth of about 30% this year and earnings per share expected to soar 50%. If you don’t mind a more aggressive play in the sector, CRWD is an interesting stock to research.
With a 70% gain year to date in 2023, Fortinet is a good example of the kind of “risk on” trades that have been doing quite well on Wall Street this year. The company’s stock recently surpassed its previous all-time high thanks to this run, and it has strong momentum as it charges into the second half of the year. At more than $50 billion in market value, it’s one of the largest cyber-specific stocks, with more than 20 different services ranging from cloud security to network monitoring.
It’s also got an impressive track record of growth, with subscription customers surging from about 5,400 three years ago to more than 23,000 at present. Those recurring subscription charges help provide a steady and reliable stream of cash to fuel continued expansion in the space.
Palo Alto Networks Inc. (PANW)
Palo Alto didn’t have a particularly grand 2022, with losses of more than 20% on the year that were even worse than the performance of the broader S&P 500. However, this cybersecurity stock has erased its losses from the past year – and then some – thanks to a red-hot run of more than 80% since Jan. 1.
Back in February, Palo Alto announced a strong earnings beat and lifted its forward guidance. Then in May, Palo Alto reported revenue growth of 24%. With public statements indicating it is committed to future expansion through acquisition on top of this organic growth, PANW is a cyber stock to watch. And at more than $70 billion in market value, it’s also one of the largest cyber-specific stocks out there.
Cloud security company Zscaler is a data protection specialist that is increasingly a necessity for companies in an age of cybersecurity and hacking risks. As proof, its customer base covers a wide range of industries including airlines, retail, financial services, health care, manufacturing, media and education. Interestingly enough, the firm was incorporated way back in 2007, though, and has been a long-time specialist in this industry with rich experience to draw on. Shares are down significantly from their 2021 highs, but momentum has been strong in 2023 with gains of more than 20% since Jan. 1.
