Five cybersecurity stocks to watch
Explore fundamental and technical key insights into the best five cybersecurity stocks to watch.
Cybersecurity stocks to watch: safeguarding digital assets and investment portfolios
In our increasingly interconnected digital world, the importance of robust cybersecurity solutions cannot be overstated. As businesses and governments worldwide grapple with persistent data breaches and sophisticated hacking threats, the demand for cutting-edge cybersecurity measures continues to surge. This growing need has sparked significant interest among investors looking to capitalise on the high-growth cybersecurity industry.
For those seeking to invest in this critical sector, here are five of the most promising cybersecurity stocks to keep a close eye on in 2024:
1. Palo Alto Networks
Palo Alto Networks has established itself as a leader in network security solutions, offering a comprehensive suite of products designed to protect enterprise networks and cloud environments from cyber threats. The company's integrated security platform combines network security, cloud security, and security operations, providing a holistic approach to digital protection.
Key highlights:
- Customer base: Over 70,000 across more than 150 countries
- Recent performance: 20% year-over-year (YOY) increase in revenue
- Stock price: Around $350.00, up 20% year-to-date (YTD) (17 September 2024)
- Future outlook: Projecting annual recurring revenue growth of approximately 53% for the current fiscal year
Analyst rating:
According to LSEG Data & Analytics fundamental analysts are rating Palo Alto Networks as a buy with 14 strong buy, 25 buy, 14 hold and 1 sell (as of 17 September 2024).
Technical analysis on the Palo Alto Networks share price:
The Palo Alto Networks share price trades close to its $380.24 February 2024 record high, a rise above which is on the cards as long as the $284.02 early August 2024 low underpins.
Palo Alto Networks share price weekly candlestick chart
Above the $380.24 all-time high beckons the psychological $400.00 mark.
2. Fortinet
Fortinet has become a top provider of cybersecurity and networking equipment, offering a wide range of solutions including firewalls, antivirus software, intrusion prevention systems, and endpoint security. The company focuses on IT infrastructure, cloud security, and the rapidly expanding Internet of Things (IoT) sector.
Key highlights:
- Customer base: Over 620,000, including a majority of Fortune 100 companies
- Stock performance: Up over 30% YTD (as of 17 September 2024)
- Recent growth: More than 30% increase in quarterly billings
- Current stock price: Around $75.00 per share
Analyst rating:
According to LSEG Data & Analytics Fortinet’s fundamental analysts rating is a hold with 4 strong buy, 12 buy and 28 hold (as of 17 September 2024).
Technical analysis on the Fortinet share price:
The Fortinet share price also trades close to its record high, made in July 2023 at $81.24.
It saw an impressive near 39% rally from its early August low within six weeks and trades around 8% below its record high.
Fortinet share price weekly candlestick chart
Above the $81.24 all-time Fortinet share price high lies the psychological $100.00 mark which will remain in focus, provided that the early August low at $54.57 underpins.
3. CrowdStrike
CrowdStrike has emerged as a leader in cloud-delivered endpoint security solutions. The company's flagship Falcon platform leverages artificial intelligence and machine learning technologies to prevent cyber breaches across enterprise devices.
A flawed software update from the cybersecurity company on Friday 19 July 2024 caused outages to the online systems of many large and small businesses that rely on Microsoft services. The defective update from CrowdStrike disrupted services and operations for Microsoft-dependent airlines, airports, banks and financial organisations such as the London Stock Exchange, wiping 40% off the company’s share price within a couple of weeks.
Bargain hunters and long-term investors saw the sell-off as a buying opportunity, provoking an over 30% recovery rally in less than a month.
Key highlights:
- Business model: Primarily driven by fast-growing subscription revenues
- Growth projection: Expecting around 25% annual recurring revenue growth
- Stock performance: 10% gain year-to-date, despite a 40% correction from highs
- Current stock price: Around $270 per share
Analyst rating:
LSEG Data & Analytics shows CrowdStrike’s fundamental analysts rating as a buy with 13 strong buy, 31 buy, 6 hold and 1 sell (as of 17 September 2024).
Technical analysis on the Crowdstrike share price:
The Crowdstrike share price already started to come off its $398.33 July 2024 record peak before the disastrous global Microsoft IT outage it caused on 19 July shaved off around 40% of its share price.
Crowdstrike share price weekly candlestick chart
The 200-week simple moving average (SMA) at $209.79 as well as the psychological $200 region acted as support in early August. Provided that it continues to do so, the CrowdStrike share price may regain all of its recent losses in the coming year by heading back up towards the $400.00 zone.
4. Okta (OKTA)
Okta has established itself as a leader in identity and access management solutions, serving over 16,000 customers globally. The company's Okta Identity Cloud enables secure connections between users and the technology they rely on for work.
Key highlights:
- Recent performance: 16% YOY revenue growth in the most recent quarter (Q2, July 2024)
- Market position: Strong presence in the essential market of identity-based security
- Stock performance: Experienced a significant correction of over 80% from its February 2021 highs and is down 15% YTD
- Current stock price: Around $75.00 per share
Analyst rating:
LSEG Data & Analytics shows Okta’s fundamental analysts rating as between a buy and a hold with 8 strong buy, 11 buy, 21 hold and 1 sell (as of 17 September 2024).
Technical analysis on the Okta share price:
The Okta share price dropped by around 75% from its $294.00 February 2021 all-time high to last week’s low at $70.56.
Okta share price weekly candlestick chart
Unlike its peers, the Okta share price has taken a huge hit over the past few years and has been side-lined around the $75.00 mark since the beginning of 2023.
The descent in the Okta share price from its March high at $114.50 is approaching support around the October 2023 low at $65.04. From around this level another up leg may be made but were this level to give way, a more significant decline towards the October 2022 low at $44.12 might be on the cards.
For the bulls to be back in control, a rise above the July and August highs at $99.91-to-$100.73 would need to occur.
5. Zscaler (ZS)
Zscaler offers a leading cloud security platform that facilitates the secure transfer of data and applications over the internet. The company's comprehensive solutions include firewalls, sandboxing, and data loss prevention, among others.
Key highlights:
- Global presence: Network of over 150 data centres ensuring secure connections
- Recent performance: 34% YOY revenue growth of $2.17 billion for its July 2024 fiscal year
- Future projection: Expecting revenues between $2.6 billion and $2.62 billion for the 2025 fiscal year
- Current stock price: Around $170.00 per share
Analyst rating:
According to LSEG Data & Analytics fundamental analysts are rating Zscaler as a buy with 11 strong buy, 19 buy and 13 hold (as of 17 September 2024).
Technical analysis on the Zscaler share price:
The Zscaler share price is also under pressure, despite having bounced off its early September $153.45 low. It would need to rise by over 24%, to above its July and August highs at $202.64-to-$208.14, for the bulls to be back in control.
Zscaler share price weekly candlestick chart
A drop through the early September low at $153.45 would probably open the way for the August 2023 low at $131.59 to be back on the cards.
Industry Outlook and Investment Considerations
As we look towards 2024 and beyond, the cybersecurity industry is poised for continued growth and innovation. The increasing frequency and sophistication of cyber attacks, coupled with the rapid digitisation of business processes and the expansion of remote work, underscore the critical importance of robust cybersecurity measures.
For investors, the cybersecurity sector offers a unique combination of growth potential and essential services. However, it's important to note that this high-growth industry can also be subject to significant volatility. The stocks mentioned above have all experienced both dramatic rises and sharp corrections, highlighting the importance of a long-term investment perspective and thorough due diligence.
As businesses and governments continue to prioritise cybersecurity spending, companies that can offer innovative, comprehensive, and scalable solutions are likely to thrive. The five stocks discussed - Palo Alto Networks, Fortinet, CrowdStrike, Zscaler, and Okta - represent a diverse cross-section of the cybersecurity industry, each with its own strengths and growth trajectories.
Ultimately, as the digital landscape evolves and cyber threats become increasingly complex, the demand for advanced cybersecurity solutions will only continue to grow. For investors with a long-term outlook and a tolerance for volatility, the cybersecurity sector presents a compelling opportunity to participate in safeguarding the digital future while potentially reaping significant returns.
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
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