In today’s constantly evolving digital environment, security software solutions are crucial in protecting valuable data. Their capacity to prevent or reduce data breaches is integral to the success of the continually expanding digital transformation in the business world.
Given this backdrop, security stocks like Fortinet, Inc. (FTNT), Qualys, Inc. (QLYS), and Tenable Holdings, Inc. (TENB) have the potential to take off this November and boost up your portfolio. But before we delve into the stock fundamentals, let’s first analyze the industry landscape.
The cybersecurity landscape is evolving into an intricate, highly interconnected system, necessitating adaptive, multi-layered, and self-learning security measures. Cybersecurity is now a central component of high-level strategic planning.
The emergence of mobile-networked devices, the prevalence of electronic communications, the growth of social media, and the escalating reliance on Big Data underscore the need for cybersecurity systems that help adapt to the changing threat landscape.
Cybersecurity statistics reflect that there are 2,200 cyberattacks per day. In the United States, a data breach costs an average of $9.44 million, while cybercrime is predicted to cost $8 trillion by 2023.
The U.S. cybersecurity market is expected to generate $71.79 billion in revenue in 2023. Also, the security services market is expected to reach $39.78 billion this year. Furthermore, the global cybersecurity market is projected to grow to $424.97 billion in 2030 at a CAGR of 13.8%.
AI is rapidly becoming a vital component for IT security organizations, enabling analysis and threat identification to reduce breach risk, direct incident response, and detect malware attacks, moving cybersecurity forward.
In light of these encouraging trends, let’s look at the fundamentals of the three Software – Security stock picks, beginning with number 3.
Stock #3: Fortinet, Inc. (FTNT)
FTNT offers comprehensive, integrated, and automated cybersecurity and networking solutions globally. Its products include FortiGate hardware and software licenses, FortiSwitch for secure switching, and FortiAP for wireless networking.
On November 2, FTNT announced that it was sharpening its business focus to prioritize high-growth, differentiated markets. The company expects to focus on Secure Networking, Universal SASE, and Security Operations markets. This strategic shift should help FTNT to accelerate its global business expansion and improve its market position.
On October 16, FTNT announced the expansion of its SASE Points-of-Presence (POPs) to new locations through a partnership with Google Cloud. This partnership is expected to enable FTNT to deliver better global coverage and improved user experience for its Universal SASE solution.
In the fiscal third quarter that ended September 30, 2023, FTNT’s total revenue increased 16.1% year-over-year to $1.33 billion, while its total gross profit increased 17.4% from the prior-year period to $1.02 billion. Its non-GAAP operating income grew 14.3% from the year-ago value to $371.40 million.
The company’s non-GAAP net income attributable to FTNT and its per share value came in at $323.50 million and $0.41, representing increases of 23.1% and 24.2%, respectively, from the prior-year quarter.
Street expects FTNT’s revenue to increase 20.1% year-over-year for the fiscal year ending December 2023 to $5.31 billion. Its EPS for the same year is expected to increase 30.9% year-over-year to $1.56. It surpassed EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 2.8% year-to-date and 1.5% intraday to close the last trading session at $50.24.
FTNT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FTNT also has an A grade for Quality. It is ranked #6 out of 23 stocks in the Software – Security industry. Click here for the additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for FTNT.
Stock #2: Qualys, Inc. (QLYS)
QLYS provides cloud-based Information Technology (IT), security, and compliance solutions. It serves enterprises, government entities, and small and medium-sized businesses in various industries, including education, financial services, government, healthcare, insurance, and utilities.
On October 31, QLYS announced the availability of its VMDR TruRisk, FixIT, and ProtectIT capabilities in the AWS Marketplace. This might benefit the company by helping companies combat ransomware.
On August 2, QLYS announced that its industry-leading capabilities, including Qualys Vulnerability Management, Detection, and Response (VMDR), would be included in Mazars’ Cybersecurity Managed Services. This might bolster the company’s market reach.
QLYS’ revenues increased 13.1% year-over-year to $142 million in the fiscal third quarter (ended September 30, 2023), while its non-GAAP gross profit came in at $117.95 million, showing an increment of 15.4% from the previous year’s value.
The company’s non-GAAP net income increased 53.9% year-over-year to $56.68 million, and its non-GAAP net income per share grew 60.6% from the prior-year quarter to $1.51.
Analysts expect QLYS’ EPS for the fiscal fourth quarter ending December 2023 to grow 22.9% from the prior-year period to $1.24. The company’s revenue for the same quarter is expected to increase 10.7% year-over-year to $144.85 million. The company topped EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 43.4% over the past year and 49.2% year-to-date to close the last trading session at $167.43.
QLYS’ strong fundamentals are reflected in its POWR Ratings. It is ranked #5 in the same industry. It has an A grade for Quality.
To see additional QLYS ratings for Growth, Value, Momentum, Stability, and Sentiment, click here.
Stock #1: Tenable Holdings, Inc. (TENB)
TENB provides cyber exposure solutions in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. The company’s offerings include Tenable.io, Tenable cs, Tenable Lumin Exposure View, etc.
On October 26, TENB announced that it had expanded its partnership with Siemens Energy to integrate Tenable OT Security into Siemns’ Omnivise T3000 control system as a Network Intrusion Detection System (NIDS). This collaboration should benefit the company.
On October 2, TENB announced that it had completed its acquisition of Ermetic, Ltd., a Cloud-Native Application Protection Platform (CNAPP) company and a Cloud Infrastructure Entitlement Management (CIEM) provider. This should bolster TENB’s operational capability.
During the fiscal third quarter that ended September 30, 2023, TENB’s revenue came in at $201.53 million, up 15.3% year-over-year, while its non-GAAP gross profit increased 14.2% from the year-ago value to $161.84 million. Its non-GAAP net income and non-GAAP EPS came in at $27.67 million and $0.23, up 61% and 53.3% year-over-year, respectively.
The consensus EPS estimate of $0.14 for the fiscal fourth quarter (ending December 2023) indicates a 12.8% year-over-year increase. Likewise, its consensus revenue estimate for the same period of $206.52 million reflects an 11.9% year-over-year rise. The company surpassed consensus EPS and revenue estimates in all four trailing quarters.
The stock has gained 4.4% over the past year and 5.7% over the past five days to close the last trading session at $37.36.
TENB’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
TENB also has a B grade for Growth and Quality. It is ranked #3 out of 23 stocks in the same industry. Click here for the additional POWR Ratings for Value, Momentum, Stability, and Sentiment for TENB.
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FTNT shares were trading at $50.57 per share on Thursday afternoon, up $0.33 (+0.66%). Year-to-date, FTNT has gained 3.44%, versus a 15.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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