With the rising adoption of automated technologies, companies face security threats that expose people’s private information, like usernames, passwords, and credit card numbers. As hackers and cybercriminals develop new ways to access sensitive systems and information, even the largest companies are vigilant about security vulnerabilities.
Given the growing demand for cybersecurity solutions to counter such malicious attacks, the cybersecurity industry is well-positioned to maintain its positive growth trajectory. Against this backdrop, let us now explore some cyber stocks Palo Alto Networks, Inc. (PANW), Fortinet, Inc. (FTNT), and Check Point Software Technologies Ltd. (CHKP).
Amid rising cyberattacks, disruptions and damage across sectors such as healthcare, education, and critical infrastructure, are excruciating. As per a data breach report by IBM, the total cost per data breach in 2022 was $4.35 million on a global scale. The U.S. breach was the most expensive and stood at $9.44 million.
With the increasing adoption of cloud security solutions, growth of IoT security, and innovation of AI and machine learning across sectors, organizations simultaneously strive to be cyber resilient.
According to IDC, global security spending will reach $219 billion this year and grow to about $300 billion in 2026, with banking, manufacturing, professional services, and federal governments being the biggest spenders. The increased trend bodes well for the future of the cybersecurity industry.
Moreover, the increasing adoption of enterprise security solutions is expected to drive the cyber security market growth in the upcoming years. The global cyber security market size is projected to grow to $424.97 billion in 2030, at a CAGR of 13.8% between 2023 and 2030.
Given this backdrop, cyber stocks PANW, FTNT, and CHKP, with strong fundamentals, could be solid buys now to capitalize on the industry tailwinds.
Palo Alto Networks, Inc. (PANW)
PANW provides cybersecurity solutions worldwide. The cybersecurity leader operates across various industries, including education, energy, financial services, government entities, healthcare, the internet and media, manufacturing, the public sector, and telecommunications.
On May 2, PANW announced that it brought its industry-leading ML-Powered Next-Generation Firewall (NGFW) to Microsoft Azure as a fully managed Azure-native ISV service. Powered by AI and ML, Cloud NGFW could stop known, unknown and zero-day threats, enabling customers to safely and more quickly migrate their applications to Azure.
In terms of the trailing-12-month gross profit margin, PANW’s 69.77% is 41.6% higher than the industry average of 49.27%. Likewise, its trailing-12-month ROE of 8.10% is significantly higher than the industry average of 0.72%.
PANW’s total revenue came in at $1.66 billion for the fiscal second quarter that ended January 31, 2023, up 25.7% year-over-year. Its total gross profit surged 30.4% year-over-year to $1.19 billion. Its non-GAAP net income came in at $331.70 million, up 79.3% year-over-year, while its non-GAAP net income per share came in at $1.05, up 81% year-over-year.
Analysts expect PANW’s total revenue to increase 25.9% year-over-year to $1.95 billion in the fiscal fourth quarter ending July 2023. Its EPS is expected to grow 49.3% from the prior-year period to $1.19. In addition, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 21.8% over the past year and 17.1% over the past three months to close its last trading session at $199.30.
PANW’s POWR Ratings reflect a robust outlook. It has an A grade for Growth and a B for Quality. Within the 21-stock Software – Security industry, it is ranked #8. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Beyond what we have mentioned above, click here for additional ratings for PANW for Value, Momentum, Stability, and Sentiment.
Fortinet, Inc. (FTNT)
FTNT offers comprehensive, integrated, and automated cybersecurity solutions worldwide. It provides FortiGate hardware and software licenses for various security and networking services.
In April, FTNT’s board of directors authorized a $1 billion increase in the authorized stock repurchase under its share repurchase program. As of May 4, 2023, approximately $1.53 billion remained available for future share repurchases.
In terms of the trailing-12-month net income margin, FTNT’s 20.46% is 757% higher than the industry average of 2.39%. Likewise, its trailing-12-month ROE, ROTC, and ROTA of 843.82%, 61.11%, and 14.15% are significantly higher than the industry averages of 0.72%, 1.81%, and 0.36%, respectively.
For the fiscal first quarter that ended March 31, 2023, FTNT’s revenue increased 32.2% year-over-year to $1.26 billion. Its total gross profit increased 36.2% from the prior-year quarter to $954.50 million. Its non-GAAP operating income surged 58.9% year-over-year to $334 million.
The company’s non-GAAP net income attributable to FTNT grew 73.9% from the year-ago value to $269.70 million, while its non-GAAP net income per share attributable to FTNT grew 78.9% from the prior-year quarter to $0.34.
Street expects FTNT’s revenue and EPS to rise 26.4% and 42.8% year-over-year to $1.30 billion and $0.34, respectively, for the fiscal second quarter ending June 2023. Furthermore, FTNT topped Street EPS in each of the trailing four quarters, which is impressive.
The stock has gained 22.1% over the past six months to close the last trading session at $67.77. It has gained 10.8% over the past three months.
FTNT’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
FTNT also has an A grade for Quality and Sentiment and a B for Growth. Within the same industry, it is ranked first.
Click here for additional POWR Ratings for FTNT (Value, Momentum, and Stability).
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 11, CHKP announced the expansion of its Check Point Harmony Endpoint protections solution by incorporating vulnerability and automated patch management capabilities. This enhancement would address the mounting number of cyberattacks that exploit unpatched system vulnerabilities for unauthorized access.
To deliver this advanced feature, CHKP joined forces with Ivanti, integrating Ivanti Patch Management to assess and remediate software vulnerabilities from cloud to edge into CHKP's Harmony Endpoint protection solution.
On May 8, CHKP announced that its MIND training program is now National Initiative for Cybersecurity Education (NICE) compliant. Created by the National Institute of Standards and Technology (NIST), the NICE framework is a fundamental reference for describing and sharing information about cybersecurity work.
MIND is designed to help make cybersecurity knowledge and skills accessible to all by equipping anyone from students to executives with the tools they need to help meet the global demand for trained professionals.
In terms of the trailing-12-month net income margin, CHKP’s 34.49% is significantly higher than the industry average of 2.39%. Likewise, its trailing-12-month ROE, ROTC, and ROTA of 26.97%, 18.21%, and 14.64% are significantly higher than the industry averages of 0.72%, 1.81%, and 0.36%, respectively.
In the fiscal first quarter that ended March 31, 2023, CHKP’s total revenues increased 4.3% year-over-year to $566.20 million. The company’s non-GAAP operating income stood at $238.40 million, and non-GAAP net income increased 7% year-over-year to $217.90 million.
Also, its non-GAAP earnings per share came in at $1.80, representing a 14.6% year-over-year improvement. Moreover, its net cash used in investing activities stood at $4.20 million as of March 31, 2023, compared to $53 million as of March 31, 2022.
The consensus EPS estimate of $1.89 for the fiscal second quarter (ending June 2023) represents a 15.5% improvement year-over-year. The consensus revenue estimate of $589.20 million for the current quarter indicates a 3.2% increase from the year-ago quarter. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has lost marginally intraday to close the last trading session at $120.17.
CHKP’s POWR Ratings reflect its positive outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
It has an A grade for Quality. It is ranked #2 within the same industry.
To see the additional POWR Ratings of CHKP for Growth, Value, Momentum, Stability, and Sentiment, click here.
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PANW shares were trading at $191.65 per share on Monday morning, down $7.65 (-3.84%). Year-to-date, PANW has gained 37.34%, versus a 8.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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