With COVID-19 massively altering how businesses are conducted and increasing dependence on technology, companies have become more prone to cyber-attacks. As remote working has taken over onsite working, with fewer security checks in place, enterprises are falling prey to cyber-crimes and data breaches. Online phishing, disruptive malware, bogus domains, fake news, and data harvesting malware have been some of the rampant forms of cyber-attacks. It’s deeply concerning to see the pace at which these crimes are rising.
Cybersecurity companies, thus, have an integral role to play here. These companies ensure the safety of their clients’ data and computing devices from any form of damage. According to Cybersecurity Ventures, global spending on information security will grow to $170.4 billion in 2022. The cybersecurity market is expected to grow 12-15% year-over-year through 2021.
So it’s no surprise that the stocks operating in the cybersecurity space are benefitting from this. Since the beginning of 2020, the First Trust NASDAQ Cybersecurity ETF (CIBR) climbed 25.2% compared to the against 8.8% returns of the SPDR S&P 500 Trust ETF (SPY).
Therefore, it’s prudent for investors to consider adding cybersecurity stocks to their portfolios from a possible second wave of COVID-19. But which ones? Today we’ll take a look at: Palo Alto Networks (PANW), Zscaler (ZS), Cloudflare (NET), and Check Point Software Technologies Ltd. (CHKP).
Palo Alto Networks, Inc. (PANW)
PANW is an industry leader in cloud-based cybersecurity. The company deploys disruptive technologies like AI, automation, analytics to find solutions to the most complex security challenges. PANW has some of the most cutting-edge firewall products and services that counter hacks and data theft. The company isn’t just restricted to the fixed network, but also extends to mobile devices and the cloud. PANW focuses on giving access only to authorized users as per their requirements. The clients can also ask for customized offerings.
Earlier this week, the company unveiled the industry’s only comprehensive Cloud Native Security Platform (CNSP), Prisma™ Cloud 2.0. This platform includes four new cloud security modules such as data security, Web Application & API security, Identity-Based Microsegmentation, and Identity and Access Management (IAM) Security. By pioneering Prisma™ Cloud 2.0, PANW has placed itself a notch above its competitors. Recently, PANW has also been recognized as a Leader in the 2020 Gartner Magic Quadrant® for WAN Edge Infrastructure.
PANW’s revenue for the fourth quarter ended July 2020 climbed 18% year-over-year to $950.4 million. The billings for the quarter and the deferred revenue, both, increased 32%. The company’s net loss expanded to $0.61 compared to $0.22 in the prior-year period. For the first quarter of fiscal 2021, the consensus revenue estimate is $918.10 million, while EPS is expected to increase 26.7% to $0.31.
The stock has gained 10.8% year-to-date to close yesterday’s trading session at $256.10. PANW is inching closer to its 52-week high at $275.03, and an upbeat fourth-quarter result bolstered its market performance. The stock has gained nearly 36.2% in the last six months.
How does PANW stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #3 out of 23 stocks in the Software – Security industry.
Zscaler, Inc. (ZS)
A dominant player in the cyber security industry, ZS empowers its clients to work remotely without worrying about their data security. The company offers a secure workforce, app security, as well as safe customer access. ZS offers secure cloud transformation across industries such as household and personal care, apparel, diversified insurance, retail & food, beverages, etc. Conglomerates like Siemens, GE, FCC, and ABInBev form the niche customer base for ZS. Operating on an expansive scale, ZS handles 120 billion transactions per day and serves 185 countries.
In September, ZS extended its strategic partnership with VMWare to boost secure digital ere transformation. The collaboration of ZS with VMWare will enable large enterprises to Secure Access Service Edge (SASE) architecture and more effectively implement Zero Trust security.
In the fourth quarter, ZS’s revenue grew 46% year-over-year to $125.9 million. The company’s deferred revenue at the end of the quarter surged 47% to $369.8 million. Meanwhile, billings climbed 55% year-over-year to $194.9 million. The loss of per share of ZS expanded to $0.38 from $0.04 in the same period last year.
ZS ended yesterday’s trading session at $155.09, gaining 233.53% year-to-date. In the last six months, the stock soared 133.29%.
ZS’s POWR Ratings reflect a strong momentum. It has an overall rating of “Strong Buy” with an “A” for Trade Grade and Buy & Hold Grade. Its Peer Grade and Industry Rank is “B”. In the Software – Security industry, it’s ranked #4.
Cloudflare, Inc. (NET)
NET is a renowned cybersecurity provider that offers unique software to enable the laptops, mobile, and tablets to function in a secure atmosphere. NET offers DDoS mitigation, secure internet domains, and content-delivery-network services among the many services. The company’s cloud network expands over 200 cities in over 100 countries in the world. MARS, L’Oreal, Doordash, IBM, Garmin, and Thomson Reuters are some of the esteemed clients served by NET. Most of these customers prefer NET due to its massive network scale, transparent pricing, and developer-friendly security services.
On October 12, the company launched Cloudflare One, a comprehensive, cloud-based network-as-a-service solution for the workforce. Today, most of the businesses are depending on the internet for their operation and there is increased demand for secure networks. Cloudflare One can allow enterprises to scale their workforce most securely. Now the distributed teams can work from multiple devices and their personal networks without the companies having to compromise on data safety.
In the second quarter ended June 2020, NET saw a 48% year-over-year increase in revenue to $99.7 million driven by the addition of large and high-paying customers. The company’s net cash flow from operations came in at $4 million at the end of the quarter compared to $2.9 million cash outflow in the prior-year period. NET is optimistic about its growth and investing in a more experienced and skilled team to scale up its operations.
NET’s loss per share for the second quarter stood at $0.09, highlighting an improvement of $0.14 year-over-year. Street estimates the loss per share for the third quarter to be $0.05, which indicates a year-over-year improvement of 66.7%. Meanwhile, the revenue is expected to grow 46.9% to $103.17 million.
The stock has tripled year-to-date to close yesterday’s trading session at $61.50. The stock has returned more than 168% in the past six months. There has been commendable growth in the stock after its IPO in September last year. The launch of Cloudflare One spurred investor optimism and the stock jumped nearly 18% in the past week.
NET’s promising outlook is reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” in Industry Rank. In the Software – Security industry, it’s ranked #6.
Check Point Software Technologies Ltd. (CHKP)
CHKP is an Israel-based multinational IT, network, endpoint security, data security, and cloud security provider. The company offers security solutions through a combination of hardware and software. Industries such as retail, financial services, government, healthcare, and education are using CHKP’s workforce and security solutions for three decades.
In September, CHKP announced the acquisition of a new cloud-based technology designed by Odo Security that delivers secure remote access. This technology can seamlessly integrate with CHKP’s Infinity architecture and can be used as the most reliable solution for enterprises to enable its mass workforce to have secure access to any application remotely.
CHKP’s second quarter revenue climbed 4% year-over-year to $506 million. The company’s revenue increased across segments due to advanced technologies like cloud, endpoint, and high performance network security. EPS for the quarter rose 14% year-over-year to $1.38.
The consensus EPS estimate for the quarter ended September is $1.53, while analysts estimated revenue to be $ 504.06 million indicating a 2.70% increase.
The stock has gained 15.4% year-to-date to close yesterday’s trading session at $128.03. Over the past six months, the stock has gained 23.37%.
CHKP’s promising outlook is reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” in Trade Grade and Buy & Hold Grade. Its Peer Grade and Industry Rank is “B”. Within the Software – Security industry, it’s ranked #5 out of 23 stocks.
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PANW shares . Year-to-date, PANW has gained 8.90%, versus a 9.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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