3 Stocks to Buy for the Future of Cybersecurity
It’s no longer a question of if we’ll get hit with another cyberattack but when. Over the weekend, several NATO sites were attacked. Reddit was the victim of an attack that saw hackers steal employee login details over the last few weeks. Cities, hospitals, schools, and government agencies are constantly threatened. And experts warn 2023 could see a sharp rise in attacks, which could fuel the upside for these top cybersecurity stocks.
“According to an analysis by Cybersecurity Venture, the global annual cost of cybercrime could top $8 trillion in 2023,” as noted by Fox News. “That number could even underestimate the problem, according to numbers from Security Intelligence, who estimated that U.S.-based financial institutions alone lost close to $1.2 billion in ransomware attacks in 2021, an almost 200% increase over the previous year. If that rate increases simultaneously, global losses from cybercrime could be as high as $16 trillion in 2023.”
None of this is new, though. What makes things worse is that governments and businesses are unprepared for catastrophic cyberattacks, as noted by Bipartisan Policy Center’s Top Risks in Cybersecurity.
As we wait to see what comes next, here are three top cybersecurity stocks you may want to consider.
| BUG | Global X Cybersecurity ETF | $23.34 |
| PANW | Palo Alto Networks | $170.14 |
| FTNT | Fortinet | $61.19 |
Global X Cybersecurity ETF (BUG)
With an expense ratio of 0.50%, the Global X Cybersecurity ETF (NASDAQ:BUG) invests in companies that benefit from the increased adoption of cybersecurity technology, such as those companies involved with the development and management of security protocols preventing intrusion and attacks to systems, networks, applications, computers, and mobile devices.
Some of the ETF’s top holdings include Fortinet (NASDAQ:FTNT), Crowdstrike (NASDAQ:CRWD), Palo Alto Networks (NASDAQ:PANW), Okta (NASDAQ:OKTA), and Rapid7 (NASDAQ:RPD), to name a few. What’s nice about an ETF is that it offers a good deal of exposure at a relatively low cost. If I wanted to buy 100 shares of the BUG ETF, it would cost me $2,315 and expose me to dozens of stocks. It would cost thousands of dollars if I were to buy 100 shares of even 50% of the BUG ETF holdings.
Palo Alto Networks (PANW)
Palo Alto Networks is the crème de la crème of top cybersecurity stocks to buy. Granted, PANW stock had a rough 2022, but so did everyone else. That said, this is one cybersecurity stock that’s coming back strong, especially after JP Morgan (NYSE:JPM) analyst Brian Essex initiated an overweight rating on the stock, with a $195 price target. The analyst sees a compelling setup for the company, with 20% annual revenue growth, expanding margins, and strong cash flow.
Better, earnings are still strong. Palo Alto’s earnings, sales, and outlook in its first quarter surpassed expectations. Total revenue for Q1 2023 jumped 25% year over year to $1.6 billion. GAAP net income was $20 million, or six cents per diluted share. For the second quarter, the company expects total billings to range from $1.94 billion to $1.99 billion, which would represent year-over-year growth of between 21% and 24%.
The company also expects total revenue ranging from $1.63 billion to $1.66 billion, representing a year-over-year growth of between 24% and 26%. That’s in addition to diluted non-GAAP net income per share in the range of $0.76 to $0.78.
Palo Alto will release Q2 2023 earnings after the bell on Tuesday, Feb. 21.
Fortinet (FTNT)
The last time I mentioned Fortinet, it traded around $54.50 on Dec. 13. Today, shares of FTNT stock are up to $60.15. From here, if the stock can break above triple-top resistance near $62.50, it could potentially revisit $70.
Analysts love the stock. Barclays (NYSE:BCS), for example, just raised its target to $68 from $56, with an overweight rating. Even Loop Capital raised its target to $80 from $66, with a buy rating. Earnings haven’t been too shabby, either, supporting these target price hikes.
The company just posted non-GAAP EPS of 44 cents in Q4, up 76% year over year. This result was also above expectations for 39 cents. Additionally, while revenues jumped 33% year-over-year to $1.28 billion, sales did come in slightly less than estimates at $1.29 billion. Moving forward, Fortinet expects earnings per share of 28 cents, which is above expectations for 27 cents. Sales are estimated to come in at $1.2 billion, which would exceed the Street’s expectations of $1.18 billion.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
