With cyberattacks increasing to 2,365 incidents and 343 million victims last year, cybersecurity stocks are more attractive. Data breaches surged 72%, highlighting the need for robust digital defenses. Cybersecurity firms provide vital software to monitor and prevent threats, offering potential long-term returns for investors. Focusing on companies in this sector with rising revenues and profits can lead to market outperformance.
With a projected 9.7% annual growth through 2030, these three top cybersecurity stocks will benefit from the surge in interest in this sector. That’s particularly true given the recent issues around CrowdStrike (NASDAQ:CRWD), and the potential market share that’s now on the table as a result of the recent update glitch.
Fortinet (FTNT)
As tech integration rises, cybersecurity becomes essential. Fortinet (NASDAQ:FTNT) has remained a leader in cybersecurity protection services. Unfortunately for investors, FTNT stock has been on the downtrend of late, dropping after the company reported slowing revenue growth and falling billings. The reaction to this billing drop was exaggerated, masking strong Q1 results with $1.35 billion in sales and $0.43 EPS. The company’s expanding Unified SASE service, now 24% of billings, promises significant long-term growth.
Based in California, Fortinet specializes in diversifying its security solutions and serves over 755,000 clients. This made the company reach a $1.41 billion revenue in Q1 2024. With a 33% free cash flow margin and consistent achievement of the “Rule of 40,” Fortinet has maintained more than 20% annual growth in billings and revenues since 2020.
Fortinet leads in cybersecurity with over 500,000 customers, notably large enterprises with high switching costs. Expanding into Unified SASE, the company expects its market potential to grow from $150 billion to $208 billion by 2027.
Zscaler (ZS)
Zscaler (NASDAQ:ZS) saw a 22% stock dip over the past six months due to increased competition, but remains a strong buy. The company’s latest features, including a breach prediction tool and an enhanced platform, alongside its Zero Trust Exchange, are set to drive growth. With Q3 revenue up 32.1% to $553.2 million and $2.2 billion in cash, Zscaler’s solid financials and expanding product portfolio offer significant long-term potential despite current market challenges.
The company has rebounded over the past year, rising 33% despite recent dips. As a smaller cybersecurity firm with a $30 billion market cap, it benefits from growing cybersecurity needs and strategic partnerships with companies like Nvidia (NASDAQ:NVDA).
Zscaler’s shares surged 14% to $178.60 in June after exceeding Q3 revenue and profit forecasts. The company raised its full-year guidance, projecting $2.14 billion in revenue and strong earnings. This boost contrasts with cautious forecasts from other cybersecurity stocks.
Palo Alto Networks (PANW)
With its shares rising 12% in 2024 and surging 336% in the past five years, Palo Alto Networks (NASDAQ:PANW) is cheap to own ASAP. The company is CIBR’s fourth-largest holding and is strong in providing cybersecurity support and solutions. Analysts are optimistic for PANW, with a consensus buy rating on the stock supporting its directional moves.
Now, the cybersecurity sector is competitive, with many startups popping out in the market. The industry is also shifting into a platformization approach due to oversaturation. However, according to its CEO Nikesh Aurora, Palo Alto has now transformed into a comprehensive platform with multiple services.
The company also has increased its billings by 3%, recently exceeding revenue expectations. Now up more than 15% year-over-year, this is a stock to continue watching through the latter half of this year. The rise in billings for Q4 is expected to be at 10%, with Palo Alto’s strategy outpacing smaller competitors.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in NVDA.