The remote lifestyle and accelerated digitization amid the COVID-19 pandemic led to an increasing number of ransomware attacks and generalized hacking, given the growing dependency on cloud computing. In addition, as the Russia-Ukraine war continues to escalate, cyber-attacks have become a real threat worldwide, highlighting the importance of advanced cybersecurity solutions.
Investors’ interest in the cybersecurity space is evident from the First Trust NASDAQ Cybersecurity ETF’s (CIBR) 20% returns over the past year. With the continuation of hybrid working, cybersecurity companies should witness steady demand for their products and solutions. According to Grand View Research, the global cyber security market is expected to grow at a CAGR of 10.9% until 2028.
Given the promising prospects of this industry, analysts are highly optimistic about the near-term performance of cybersecurity stocks Cloudflare, Inc. (NET) and Zscaler, Inc. (ZS). So, it could be wise to add these stocks to your watch list.
Click here to checkout our Cybersecurity Industry Report for 2022
Cloudflare, Inc. (NET)
NET operates a cloud platform that delivers a range of network services to businesses worldwide. The company provides an integrated cloud-based security solution to secure a range of media combinations.
On February 11, 2022, NET announced that it had acquired Vectrix, which provides businesses with one-click visibility and control across all of their SaaS applications. The acquisition adds modern cloud access security broker functionality to the company’s industry-leading Zero Trust platform, which could further increase its demand.
NET’s revenue increased 54% year-over-year to $193.60 million for the fiscal fourth quarter ended December 31, 2021. The company’s non-GAAP income from operations came in at $2.20 million compared to a loss of $5.50 million in the year-ago period. Its non-GAAP net income came in at $0.10 million compared to a loss of $7.40 million in the prior-year quarter. However, its loss per share grew 118.2% year-over-year to $0.24.
Analysts expect NET’s EPS to increase 200% year-over-year to $0.09 in fiscal 2023. Its revenue is expected to increase 55.7% year-over-year to $205.65 million for the quarter ending March 31, 2022. The stock soared 28.5% over the past year to close yesterday’s trading session at $95.16. Wall Street analysts expect the stock to hit $151.39 in the near term, which indicates a potential upside of 59.1%.
Zscaler, Inc. (ZS)
Cloud-based security company ZS provides a platform built as a multi-tenant, distributed cloud service designed to scale and deliver real-time insights into security issues. It mainly offers two principal cloud services — Zscaler Internet Access and Zscaler Private Access.
On February 24, 2022, Jay Chaudhry, Chairman, and CEO of ZS, said, "The importance of our Zero Trust Exchange architecture has never been clearer to customers undertaking digital transformation. Customers are not only gaining security advantages from our Zero Trust model but they are also reaping the benefits of faster innovation and economics from our global cloud, which is now processing more than 210 billion transactions per day.”
ZS’ revenues increased 63% year-over-year to $255.6 million for the fiscal second quarter ended January 31, 2022. The company’s non-GAAP income from operations grew 50.7% year-over-year to $22.30 million, while its non-GAAP net income came in at $19.20 million representing a 37.1% year-over-year increase. Also, its non-GAAP EPS came in at $0.13, up 30% year-over-year.
For fiscal 2023, analysts expect ZS’ EPS to increase 74.5% year-over-year to $0.96. It surpassed Street EPS estimates in each of the trailing four quarters. Its revenue is expected to be $1.05 billion in fiscal 2022, representing a 55.8% year-over-year rise. Over the past year, the stock has gained 13.6% to close yesterday’s trading session at $207.03. Wall Street analysts expect the stock to hit $311.17 in the near term, which indicates a potential upside of 50.3%.
NET shares fell $0.56 (-0.53%) in after-hours trading Thursday. Year-to-date, NET has declined -19.16%, versus a -7.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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