Cyberattacks have increased manifold over the past two years because of the rapid digitization of almost all industries. The ongoing Russia-Ukraine war has also exacerbated the risk of cyberattacks.
Earlier this year, President Biden warned of cyberattacks from Russia in the wake of economic sanctions imposed on the country. This has also boosted the demand for cybersecurity.
Moreover, the shift to hybrid work has accelerated the growth of cloud-based network security. The global cybersecurity market is projected to reach $376.32 billion by 2029, growing at a CAGR of 13.4%.
Given this backdrop, fundamentally sound cybersecurity stocks Check Point Software Technologies Ltd. (CHKP) and Qualys, Inc. (QLYS) could be good additions to one’s portfolio. However, CrowdStrike Holdings, Inc. (CRWD) and Okta, Inc. (OKTA) are best avoided now due to their bleak outlook and weak financials.
Stocks to Buy:
Check Point Software Technologies Ltd. (CHKP)
CHKP is a leading provider of cyber security solutions to corporate enterprises and governments globally. It offers network security, endpoint security, data security, and management solutions to enterprises, service providers, small and medium-sized businesses, and consumers.
On May 18, the company introduced malicious file protection for mobile devices. The new version of Harmony Mobile is expected to enhance CHKP’s mobile security solutions.
On May 17, CHKP partnered with Provision-ISR to provide on-device IoT security for video surveillance solutions. Analysts expect this solution to be the best in the market and aid both companies in reducing cybercrimes considerably.
In the fiscal first quarter (ended March 31, 2022), CHKP’s total revenues increased 7% year-over-year to $542.70 million. Its security subscription revenues increased 14% from the year-ago value to $201.60 million. The company’s non-GAAP EPS came in at $1.57, representing a 2% year-over-year improvement.
The consensus EPS estimate of $1.62 for the fiscal second quarter (ending June 2022) represents a marginal improvement year-over-year. The consensus revenue estimate of $560.44 million for the ongoing quarter indicates a 6.5% increase from the same period last year.
The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 6.2%.
CHKP’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock has an A grade for Quality. Among the 29 stocks in the F-rated Software - Security industry, it is ranked #4. Click here to see the POWR Ratings of CHKP for Growth, Value, Momentum, Stability, and Sentiment.
Qualys, Inc. (QLYS)
QLYS is a pioneer and leading provider of disruptive cloud-based IT, security, and compliance solutions. The company offers Qualys Cloud Apps, Threat Protection, Continuous Monitoring, Multi-Vector Endpoint Detection and Response, and Web Application Scanning, among other solutions.
It serves enterprises, government entities, and small and medium-sized businesses across several industries.
On June 6, QLYS unveiled Vulnerability Management, Detection, and Response (VMDR) 2.0. with TruRisk scores and automated remediation workflows.
On April 4, QLYS launched Multi-Vector EDR 2.0 integrated with additional threat-hunting and risk mitigation capabilities. These platforms designed for a quicker response to high-priority threats are expected to be highly demanded by companies highly susceptible to cyberattacks.
On May 3, the company introduced an enhanced channel and integration partner program, which might drive further growth and enable customer success.
Suzanne Swanson, senior vice president of Global Partners, Qualys, said, “Qualys is empowering partners by making our renowned Cloud Platform and more than 20 IT, security and compliance apps available to them, accompanied by the best possible support, tools and resources to help expand joint business.”
QLYS’ revenues increased 17% year-over-year to $113.42 million in the first quarter ended March 31, 2022. The company’s non-GAAP operating income increased 27% from the year-ago value to $46.99 million, while its non-GAAP net income grew 19.5% year-over-year to $35.56 million. QLYS’ non-GAAP net income per share rose 20.3% from the prior-year quarter to $0.89.
Analysts expect QLYS’s EPS and revenue to increase marginally and 17.9% year-over-year to $0.79 and $117.52 million, respectively, in the fiscal second quarter (ending June 2022). QLYS has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. QLYS has gained 15.1% over the past year.
QLYS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. QLYS has an A grade for Quality. Within the same industry, it is ranked #6 of the 29 stocks.
Click here to see the additional POWR Ratings for QLYS (Growth, Value, Momentum, Stability, and Sentiment).
Stocks to Avoid:
CrowdStrike Holdings, Inc. (CRWD)
CRWD is a cloud-delivered solutions provider for endpoint and cloud workload protection via a software-as-a-service (SaaS) subscription-based model. Its offerings include threat intelligence, managed security services, IT operations management, threat hunting, Zero Trust identity protection, and log management.
For its fiscal 2023 first quarter ended April 30, 2022, CRWD’s total operating expenses increased 50.5% year-over-year to $384.89 million. Its loss from operations for the same period amounted to $23.88 million.
The company’s net loss attributable to CrowdStrike amounted to $31.52 million, while its net loss per share attributable to CrowdStrike common stockholders came in at $0.14. The stock has declined 20% year-to-date.
CRWD’s POWR Ratings reflect its poor prospects. The stock has a D grade for Value, Momentum, and Stability. Within the Software - Security industry, it is ranked #14 of 29 stocks. Click here to see CRWD's POWR Ratings for Growth, Sentiment, and Quality.
Okta, Inc. (OKTA)
OKTA is a leading provider of identity solutions. Its Okta Identity Cloud is an independent and neutral cloud-based identity solution that can be integrated with any application, service, or cloud.
It also offers products including Universal Login, Attack Protection, Adaptive Multi-Factor Authentication, Passwordless, Machine to Machine, Private Cloud, and Organizations through Auth0, Inc.
For its fiscal first quarter ended April 30, 2022, OKTA’s non-GAAP operating loss increased 158.1% year-over-year to $41.03 million. Its non-GAAP net loss increased 228.1% from the prior-year period to $42.60 million. The company’s non-GAAP net loss per share came in at $0.27, up 170% from the prior-year period.
The Street expects the consensus loss per share estimate for the fiscal second quarter (ending July 2022) to be $0.31, widening 177.7% from the prior-year value. Also, the company could not surpass the consensus EPS estimates in each of the trailing four quarters. The stock has slumped 63.1% year-to-date.
OKTA’s POWR Ratings are consistent with this bleak outlook. It has an overall D rating, which translates to Sell in our proprietary rating system. The stock also has a D grade for Value, Momentum, Stability, and Quality. It is ranked #25 in the same industry.
To see the additional POWR Ratings for Growth and Sentiment for OKTA, click here.
CHKP shares were unchanged in premarket trading Tuesday. Year-to-date, CHKP has gained 2.45%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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