At first glance, it seems entirely logical to use artificial intelligence (AI) to help find high-return cybersecurity stocks. Forbes wrote that 76% of enterprise companies prioritize AI and machine learning in their IT budgets to help control the volume of cyber threats caused by an explosion in data that must be analyzed.
However, using AI tools to identify these types of stocks is also a bit ironic. That’s because AI also has the potential to be used by cybercriminals, which could mean cybersecurity companies would be adapting to new threats.
To be clear, AI will likely be a net positive for cybersecurity tools. And with increasing dollars being invested into AI-driven cybersecurity, it is not too late for investors to get in on this sector.
To help with idea generation, I asked Microsoft’s Bing AI assistant for help. My prompt was: Hi Bing, I am writing an article titled “3 Cybersecurity Stocks That AI Predicts Will Deliver Triple-Digit Returns in 2024.” Can you give me some ideas? Here are three of the picks it provided.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) is one of the leading names in the cybersecurity sector. The company offers a variety of products, such as its next-generation firewalls (NGFW) and cloud security tools to identify threats and provide endpoint detection and response capabilities.
PANW stock has been on a tear. In 2023 alone, the stock is up about 83%, and it’s now trading near its all-time high. With a P/E ratio of over 400, it’s easy to see why some investors may feel Palo Alto’s place among high-return cybersecurity stocks is in jeopardy.
However, the company is expected to increase earnings by just over 30% this year as revenue continues to accelerate. And since the company reported earnings in May, at least three analysts increased their price targets to a level above the stock’s price of $255.51 at the time of this writing.
CrowdStrike (CRWD)
CrowdStrike (NASDAQ:CRWD) is widely considered to be the sector leader in endpoint security. That means focusing on securing digital endpoints like laptops and mobile devices. The initiative has become a higher priority with the expansion of remote work. The company’s business model focuses on using machine learning to identify threats.
Like many stocks in the tech sector, CrowdStrike underperformed in 2022. And even though CRWD stock is up about 40% through the first half of 2023, it’s still down from this time last year.
One concern has been profitability. Heading into 2023, CrowdStrike had posted four consecutive quarters of negative earnings per share despite strong topline growth over that same period.
However, analysts are projecting the company to post positive earnings over the next 12 months. Since earnings growth is usually an accurate predictor of stock price growth, now could be a good time to get in on this high-return cybersecurity stock.
Palantir (PLTR)
We’ve looked at one high-growth stock that is likely to move higher. We’ve also looked at one market laggard poised for a turnaround. Palantir (NYSE:PLTR) makes this list of high-return cybersecurity stocks because it may offer the easiest path for investors to book triple-digit gains by the end of next year.
Palantir is making headlines because of its AI solutions, but the company is also a leader in cybersecurity. Through its Foundry platform, Palantir promotes returning to “security first principles.” The company’s approach is to strengthen a business’ basic cybersecurity practices, setting it up to guard against more advanced attacks.
One of the knocks against Palantir was its inability to turn a profit, but it has reported positive earnings per share in the last two quarters. The company projects that trend will continue for the rest of 2023 and beyond.
PLTR stock spiked following its May earnings as part of the AI bubble. Investors who didn’t get in before that rally may want to wait for some expected consolidation before taking a position. Nevertheless, if you’re looking for triple-digit investment returns in the next 18 months, PLTR stock could be one to watch closely.
On the date of publication, Chris Markoch had a LONG position in PLTR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.