When you consider the question of which cybersecurity stocks to buy and hold, the better question may be which ones you shouldn’t hold. That’s because cybersecurity is perhaps one of the most essential services for businesses of all sizes.
That’s why Morgan Stanley is reporting that 30% of chief technology officers are saying cybersecurity is the area of technology spending that is the least likely to be cut.
Cybersecurity has truly become like insurance, and businesses can’t afford to ignore it.
That doesn’t mean it has been easy for investors to hold cybersecurity stocks. Like all tech stocks, cybersecurity names have taken a beating this year. As a result, their valuations have sunk, although some of their valuations are still elevated.
But if you’re looking for growth stocks to add in 2023, cybersecurity is a good place to look. Here are seven cybersecurity stocks that you can safely and profitably buy and hold.
Palo Alto Networks (PANW)
Palo Alto Networks (NYSE:PANW) led off my list of cybersecurity stocks to buy and hold in October and there’s no reason for it not to top the list again. It’s hard to understate the bullish nature of Palo Alto Networks’ latest earnings report. The company beat analysts’ average revenue estimate by a small amount, but its profits blew away the mean projection. The 83 cents per share the company delivered was 20% better than the 69 cents that analysts, on average, were expecting.
That was the second straight quarters in which Palo Alto reported positive earnings. That was the first time the company has put together such a streak since prior to the pandemic. And it may not be the last.
Palo Alto said that its customers feel more confident about making long-term deals with PANW. That’s one reason why the company is expects its top line to jump 25% during its current fiscal year. Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is next on my list of cybersecurity stocks to buy and hold. Through its Azure cloud computing platform, the company “provides a comprehensive zero trust approach to security, identity, and cybersecurity.” And MSFT continues to expand. In 2021, Microsoft spent over $500 million on its strategic acquisitions.
Microsoft is not a pure play on cybersecurity. But if you’re looking for a good stock to buy in these volatile times, MSFT stock may be a good fit for your portfolio. The Washington-based company has a market cap of over $1.8 trillion, and its revenue and earnings always grow from quarter to quarter and year to year.
And Microsoft checks in with a price-to-earnings (P/E) ratio of just over 26. That’s a very reasonable valuation for a technology stock.
Tenable Holdings (NASDAQ:TENB) is a new entry on this list of cybersecurity stocks to buy and hold. I’ve added Tenable to this list because it provides companies with an exposure management platform. The platform gives companies “comprehensive visibility” while allowing them to “anticipate threats, prioritize remediation and reduce risk.”
Essentially, Tenable is helping its customers understand where their threats are coming from, enabling them to make more informed decisions about how to protect their businesses.
Tenable has over 40,000 customers and, while it’s not yet profitable, analysts expect the company’s EPS to climb by an average of nearly 50% per year for the next five years. Last quarter, Tenable delivered EPS of 15 cents as opposed to the 3 cents per share projected, on average, by analysts.
Zscaler Inc. (ZS)
It’s not surprising that the nature of cyber threats is evolving since the character of workforces has changed, most likely permanently, due to the rise of remote work.
That change is creating the need for zero-trust cybersecurity models. And that’s the specialty of Zscaler (NASDAQ:ZS). In a zero-trust platform, organizations are guided not to trust anything inside or outside their network perimeter.
That means that every user who’s trying to connect to an organization’s network has to be verified. And that perimeter is becoming increasingly larger as more companies embrace remote work.
The Zscaler Zero Trust Exchange focuses on allowing all users on a network to safely browse the internet and access applications, no matter what device they’re on or where they are.
The company is not expected to be profitable in the next few years. However, analysts expect its top and bottom lines to grow a great deal over the longer term, making ZS stock one of my cybersecurity stocks to buy and hold. CrowdStrike Holdings (CRWD)
CrowdStrike (NASDAQ:CRWD) is the largest cybersecurity company in terms of market capitalization. The company offers cloud-native solutions that are well-suited for firms that have employees working remotely. CrowdStrike’s products focus on helping move existing security protocols into the cloud.
In October, I pointed out that CRWD stock was “only” down 20% in 2022. But as it turned out, the stock has continued to drop and is now down 31% this year.
One reason is that the company continues to be unprofitable . However, that shouldn’t steer you away from buying CRWD stock. The company has the cash on hand to meet its financial obligations. And that means that it can become profitable over the long term.
Analysts have an average price target of $238 on CRWD stock, versus its current price of $141.
Fortinet (NASDAQ:FTNT) continues to make my list of cybersecurity stocks to buy and hold because of its focus on data centers. The latter facilities are among the most appealing targets for cyberattacks due to their importance to businesses.
Consequently, companies have to pay a great deal of money to protect their data centers. Fortinet’s Fortinet Security Fabric accomplishes the latter goal. The product utilizes Cybersecurity Mesh Architecture (CSMA) – an architectural approach “that promotes interoperability between distinct security products to achieve a more consolidated security posture.”
FTNT stock is down 26% in 2022. But Fortinet is still the second-largest pure-play cybersecurity company after Palo Alto Networks. And FTNT is expected to continue to grow both its revenue and earnings by an average of 10% or more over the next five year.
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Article initially appeared on investorplace.com
Credit: investorplace.com, WSJ.com, CBE
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