3 Sorry Cybersecurity Stocks to Sell in February While You Still Can
The cybersecurity market has been booming in recent years as more enterprises adopt digital transformation initiatives to enhance their productivity and efficiency. Increased digital transformation has led to increased cyber threats and data breaches. As a result, cybersecurity is essential to protect the infrastructure that supports the digital transformation efforts of modern enterprises.
However, the rise of cybersecurity does not mean there are not any companies in the space worth selling. Below are 3 sorry cybersecurity stocks investors should sell while they still can.
Rapid7 (RPD)
Rapid7 (NASDAQ:RPD) is a cloud cybersecurity company specializing in vulnerability management, threat detection and response solutions. The company’s Insight platform attempts to provider customers with a holistic cloud solution for a variety of cybersecurity needs.
Rapid7 experienced strong growth during the years preceding and following the advent of the Covid-19 pandemic. However, the rise of interest rates and the deteriorating economic environment that ensued has put in jeopardy a number of tech business models that rely on constant customer acquisition. This is underscored by Rapid7’s Q4 earnings report. While revenue and EPS came in ahead of estimates, the company issued weak guidance. This indicates cybersecurity firms are not out of the woods yet in terms of the macroeconomic environment.
RPD shares are essentially trading flat year to date (YTD), and investors should use this opportunity to sell their shares before things get worse.
Okta (OKTA)
Okta (NASDAQ:OKTA) is a cybersecurity firm that develops identity and access management (IAM) solutions for cloud-based applications and platforms. Put slightly differently, Okta enables its customers to securely manage the identities of their employees, customers, and partners across various security assets and endpoints.
The rise of remote work supplied Okta with ample growth throughout the pandemic. This resulted in Okta cutting a strong position for itself in the fast-growing IAM market. Unfortunately, not everything has been rosy.
Revenue growth has been on the decline in 2023, due to businesses becoming more thoughtful on their tech-spend. Unfortunately, Okta is still largely unprofitable. A sizable beat on revenue in November does not overshadow the larger growth risks in the current market. This makes it one of those cybersecurity stocks to sell. Moreover, Okta’s multiple is already looking stretched. The company trades at 44.3x forward earnings.
BlackBerry (BB)
Former smartphone pioneer BlackBerry (NYSE:BB) originally found its edge in the added layer of security provided in its mobile handsets. It’s true that BlackBerry isn’t selling new smartphones anymore. But, the company has refined security features in its pivot to provide software and services for cybersecurity, enterprise mobility, and the Internet of Things (IoT).
Unfortunately for BB, it faces a market of well-established rivals such as Microsoft (NASDAQ:MSFT), VMware (NYSE:VMW), and Symantec. The cybersecurity company beat Q3 earnings estimates in December. But the economic environment is not necessarily inviting. BlackBerry’s high valuation is a result of the company having fallen into net loss territory since the pandemic years. Also, it’s a touchpoint that should raise eyebrows.
Investors would perhaps be better off looking into other cybersecurity stocks before placing another bet on whether or not BlackBerry will return to form.
On the date of publication, Tyrik Torres did not have (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.
