3 Top Cybersecurity Stocks to Buy in May

3 Top Cybersecurity Stocks to Buy in May


In difficult market times like these, investors need to re-examine which tailwinds in the industry will not be affected. With rising inflation and the potential for a recession, many companies that depend on consumer spending have cause for concern. However, one area that is not affected by this sentiment is cybersecurity.

Cybersecurity is a growing concern for both businesses and customers. No one wants their data to be exposed or corrupted, so companies need to make sure they take every possible step to protect themselves. This makes cybersecurity stocks a big buy today, as they are being sold to their tech brothers, although their businesses are unlikely to be affected. My top three cybersecurity actions to buy right now are CrowdStrike Holdings (CRWD) 11.79%), Cloudflare (NET 17.01%)i OK (OKTA 11.41%).

Suspicious-looking person who looks like a hacker.

Image source: Getty Images.

1. CrowdStrike

My best selection of the three, CrowdStrike, offers cloud-based endpoint software that protects against breaches. With more than 20 different modules, it offers a solution for many applications.

Its software has been widely adopted, with 65 of the Fortune 100 and 15 of the top 20 banks using CrowdStrike. With more than 16,000 customers in total, it has a wide reach.

For fiscal year 2022 (ending January 31), CrowdStrike increased its revenue 66% year-over-year to $ 1.45 billion, maintaining a free cash flow margin of 30.5%. It is growing rapidly and profitably, allowing the company to be agile when navigating complex markets or making acquisitions.

With the company projecting 48% revenue growth (at the midpoint of the guidance) for its current fiscal year, the future looks bright. Investors will learn more about how CrowdStrike manages its current environment when it reports results for the first quarter of fiscal year 2023 on June 2nd. Until then, shareholders will have to hold on as stocks continue to fall, just because of market sentiment.

2. Cloudflare

Cloudflare is not only focused on cybersecurity, but is well-suited to its core offering. The company is installing data centers around the world so that anyone can host a website on their servers. By placing data centers physically close to customers, websites work faster. Among other things, Cloudflare provides security for these websites.

Customers will have the latest technology and top-notch security by choosing Cloudflare. With over 154,000 customers, it is making an excellent market.

First-quarter revenue grew 54% year-over-year to $ 212 million, while large customers (those who spend more than $ 100,000 a year) rose 63% to $ 1,537. It also recorded for the first time a positive adjusted operating margin of 2%.

While not as profitable as CrowdStrike, Cloudflare is in the early stages of what it believes is a $ 100 billion market opportunity by 2024. With projected management of around 45% revenue growth this year, the stock investment thesis is on track.

Two people looking at a computer in a data center.

Image source: Getty Images.

3. Octave

Identity management is Okta’s niche, and it does so for both the client and the company. With Okta products, computers can set up single sign-on and multi-factor authentication for their customers’ employees to ensure the right people access the right programs at the right time. Okta also allows its customers to integrate multifactor authentication for their external customers so that accounts and personal information are protected.

In 2021, Okta acquired Auth0, which allowed developers to add multifactor authentication in virtually all encryption languages. This addition fits Okta’s suite of products, but skews its financial results.

In fiscal year 2022 (ending Jan. 31), revenue grew 56% year-over-year to $ 1.3 billion with Auth0 and 39% to $ 1.16 billion without it. A key metric for Okta is the outstanding performance obligations (RPOs), which take into account the backlog of subscriptions. This metric was $ 2.69 billion, 60% more than the previous year. The company expects to raise $ 1.35 billion from this portfolio in the next 12 months.

Without any customer additions or product expansions, Okta can now increase its revenue. It is a solid company in a great financial position with $ 2.5 billion on its balance sheet as of January 31.

How are these actions valued?

These three actions are often considered industry leaders. As a result, their ratings are high. But with the recent weakness of the market, valuations have been cut.

PS CRWD ratio graph

CRWD P / S relationship. Data by YCharts.

From a price-to-sales (P / S) ratio, there are some interesting conclusions. Okta is the cheapest, but its market opportunity is not as wide as the others. Cloudflare used to trade for more than 100 times sales, but now trades around 25 due solely to market sentiment. CrowdStrike is also around 25 P / S, but has not been seen close to the decline that Cloudflare has, mainly due to its high-quality cash flows.

With the shares of these three companies down about 48% (CrowdStrike), 69% (Okta) and 74% (Cloudflare), many investors have launched these shares. But with secular tailwinds unlikely to be affected by consumer spending or a recession, these cybersecurity companies are making big long-term investments. Use the current market weakness as a buying opportunity to access these top-notch companies with a big discount.





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