3 Sorry Cybersecurity Stocks to Sell in March While You Still Can
While macroeconomic uncertainty has put pressure on many businesses’ budgets, cybersecurity continues to be important as ever. Vast amounts of enterprises are pursuing digital transformation, and many aspects of life are online now, which means these pools of data need to be secured efficiently. In other words, cybersecurity is essential to protect the infrastructure that supports the digital world on which we rely heavily, but not all stocks in this space are thriving. Below are three sorry cybersecurity stocks to sell while you 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 provide 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 cybersecurity stocks to sell in jeopardy, as their business models 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 many cybersecurity firms are not out of the woods yet in terms of the macroeconomic environment. To underscore the point, Rapid7’s revenue growth halved from fiscal year 2022 to fiscal year 2023. In particular, in 2023, top-line figures grew 13.5% on a year-over-year basis, well below revenue growth figures generated in prior fiscal years, which tended to be between 25-35%.
RPD shares have fallen nearly 12.43% on a year-to-date (YTD) perspective. Investors still holding the stock now would probably be better off absorbing their losses and moving on to better performers in the market.
SentinelOne (S)
SentinelOne (NYSE:S) is a global provider of cloud-based cybersecurity solutions, best-known for its ‘Singularity Extended Detection and Response Platform’. The concept leverages artificial intelligence to power cybersecurity solutions on an organization’s cloud network.
Singularity’s value proposition was simple. AI technology would create a human-like experience for the platform’s users, thus significantly decreasing upfront costs for customers. Addressing this pain-point in cybersecurity, SentinelOne roared into prominence with a record $1.2 billion in its 2021 initial public offering. Back then, Sentinel was posting triple-digit revenue growth and was a force to be reckoned with.
In its recent Q4 earnings report, while financial figures did come in above what Wall Street had been estimating, guidance for the company’s following fiscal year was not sorely underwhelming. SentinelOne expects to grow revenue by 36% year-over-year in fiscal year 2025, but this growth rate is also below that of prior years. This, again, highlights the cybersecurity market participants are still embroiled in macroeconomic uncertainty and intense competition, especially with fast-growing competitors like CrowdStrike (NASDAQ:CRWD) snapping up market share.
Tenable (TENB)
Tenable Holdings (NASDAQ:TENB) has been another promising cloud-based cybersecurity platform. The platform specializes in “exposure management” solutions, which help companies to identify cybersecurity vulnerabilities in their private and public cloud infrastructure. The firm’s turnkey solutions were in high demand during the pandemic as many enterprises accelerated their cloud migration plans.
In October 2022, Tenable slightly shifted strategy and announced ‘Tenable One’ which would unify all existing solutions onto the platform. This unification strategy seems to be working out well for them. In its recent fourth quarter earnings print, revenue and EPS figures came in above Wall Street estimates, driven by “strength” in the Tenable One platform.
Despite a successful quarter, revenue growth has continued to trail prior years. In 2023, top-line figures grew year-over-year by 19%, while growth in prior years had been solidly in the mid-to-high 20 percentage points. the company’s share price has certainly underperformed the market. TENB has risen just about 10.34% YTD, which means its trailing the Nasdaq and S&P500. Tenable’s relatively high multiple also could complicate a potential share price recovery.
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.
