Cybersecurity Stocks: Key Takeaways
- As cybercrime ramps up, cybersecurity stocks increase in value…
- One of the stocks on this watchlist is up a staggering 1,400% since its IPO…
- Why cybersecurity stocks should be on your radar…
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You wouldn’t want to live in a house with a front door that doesn’t lock, right? Well, tech companies don’t want to run businesses without data protection. And cybersecurity stocks offer a solution.
As the world goes digital, the cybersecurity industry grows and expands with it. It seems everyone will need cybersecurity, which is probably why many of these stocks have already made HUGE moves over the past few years…
Here are seven cybersecurity stocks on my watchlist. (Details below.)
- Check Point Software Technologies Ltd. (NASDAQ: CHKP … see my analysis here)
- Cloudflare, Inc (NYSE: NET … see my analysis here)
- CrowdStrike Holdings, Inc. (NASDAQ: CRWD … see my analysis here)
- Fortinet, Inc. (NASDAQ: FTNT … see my analysis here)
- Mimecast Limited (NASDAQ: MIME … see my analysis here)
- Palo Alto Networks, Inc. (NYSE: PANW … see my analysis here)
- Zscaler, Inc. (NASDAQ: ZS … see my analysis here)
The Main Cybersecurity Sectors
Cybersecurity is a broad term. In short, it’s the measures that people, companies, and governments take to protect data. Just think of all the scammers out trying to damage or steal data every day.
Yep, it’s a big industry, so cybersecurity stocks operate in a variety of categories. Here are the most important to understand:
- App security
- Network security — for large scale computer networks
- Cloud security — gotta keep that cloud data safe
- Mobile security — we all want protected smartphones
- Critical infrastructure — think sensitive government data here
- Risk management
I’m the first to admit that I’m not a cybersecurity expert. And these concepts are too complex to fully explore here.
But you don’t have to be a big tech CEO to see the potential with cybersecurity stocks. These companies are vital to nearly every major tech business on the planet.
Some have been some of the greatest investments so far this century…
Why Trade Cybersecurity Stocks?
The cybersecurity industry had a value of $167 billion in 2020. But it would be nothing without cybercrime.
Cybersecurity companies offer both software and hardware solutions for protecting precious digital assets against cyberattacks.
When cybercrime is all over the news, cybersecurity stocks tend to do well.
Just this year, we’ve seen many high-profile cyberattacks make headlines — Colonial Pipeline, the NBA, Brenntag, Acer, Kia Motors, and CD Projekt.
The list goes on, but you get the idea. Cybercrime is a big problem. If you think about it, the internet is still new, and the story of cybercrime has only just begun.
And as tech grows, the market for cybersecurity stocks should as well. Let’s check out a few notable tickers…
Cybersecurity Stocks #1. Check Point Software Technologies Ltd. (NASDAQ: CHKP)
CHKP is an Israeli-American company that traffics in a number of cybersecurity practices. That includes network, endpoint, cloud, mobile, and data security.
Founded in 1993, Check Point started with firewall and private network technology. Founder and CEO Gil Schwed developed a concept known as stateful inspection. That eventually turned into a fully functioning firewall platform.
Check Point also established one of the world’s first virtual private networks (VPNs). In today’s tech-dominated world, VPNs are huge. Those who like shielding their browsing history and privacy use VPNs.
Check Point now focuses on what it calls Gen V cybersecurity. That’s an ominous evolution in cyber attacking that many major cybersecurity firms warn users about.
But the most compelling fact about this company might be its status as a cybersecurity startup incubator of sorts. Several former Check Point employees have gone on to start successful IT security companies of their own including Imperva, Palo Alto Networks, Tufin, and Indeni.
Cybersecurity Stocks #2. Cloudflare, Inc (NYSE: NET)
When a stock’s up as much as 500% since its debut (just 18 months ago), the company’s usually doing something right. This seems to be the case with web infrastructure and security provider Cloudflare.
NET provides customers with both a content delivery network (CDN) and DDoS attack protection. Think of these as both a mailman and a bodyguard for big-tech data, respectively.
The CDN makes sure that huge caches of digital information get delivered smoothly and accurately, while Cloudflare’s DDoS mitigation services help to insulate that data from cyberattacks.
The stock market has rewarded Cloudflare handsomely since its public debut. The company currently sits on a $38 billion valuation. This rise tracks with the huge transformation we’ve seen in tech in recent years…
Over the past two decades, content delivery has flourished into BIG business. And protecting that content from hackers is important.
Cybersecurity Stocks #3. CrowdStrike Holdings, Inc. (NASDAQ: CRWD)
CrowdStrike Holdings is another cybersecurity stock that has surged since its 2019 IPO. It’s up more than 330% at writing. CrowdStrike’s area of expertise is endpoint protection — security for personal desktops, laptops, and mobile devices.
CrowdStrike was founded in 2012, with its first product being a threat intelligence module. And the company quickly rose to worldwide prominence through its investigations of highly-publicized cyberattacks on both Sony Pictures and the Democratic National Committee.
Since then, CRWD has kept its attention on stopping cyberattacks. Unlike Cloudflare, CrowdStrike doesn’t deal in any content delivery services. The company’s mission statement seems pretty clear, with the website’s “About” page boldly stating: “We stop breaches.”
The crown jewel of its services is its Falcon Platform, which the company describes as a “unified cloud-native framework that powers the next generation of enterprise security and IT operations to solve real-world customer problems.”
Cybersecurity Stocks #4. Fortinet, Inc. (NASDAQ: FTNT)
FTNT provides “security fabrics” designed to protect from DDoS attacks. Think of this as a more all-encompassing, infrastructure-wide security protocol than some of the ‘bolt-on’ services its competitors offer.
Fortinet was founded by brothers Ken and Michael Xie in 2000. Ken Xie is somewhat of a legend. He sold his previous company NetScreen to Juniper Networks for $4 billion in 2004. And he’s the original inventor of ASIC-based firewall/VPN appliances.
But when starting Fortinet, the brothers’ first product was a physical firewall. That’s a small hardware device that filters unwanted traffic out of a network server. From there, Fortinet expanded into sandboxing, wireless access points, and messaging security.
These products are too complicated to try to explain here. But you only need to look at the chart to see how powerful this company appears to be…
Traders should keep Fortinet on their radar. The stock is up more than 100% year-to-date.
Cybersecurity Stocks #5. Mimecast Limited (NASDAQ: MIME)
This London-based company specializes in cloud-based email management for Microsoft Exchange and Microsoft Office 365.
Specifically, MIME provides a proprietary cloud architecture. It combines email security, service continuity, and archiving into a single package.
Mimecast has been on an acquisition tear over the past four years. It bought Ataata and Solebit in 2018, DMarc Analyzer in 2019, and Segasec in 2020.
Whenever a company engages in widespread M&A, it could be an indication of potential future volatility. And volatility usually means juicy trading opportunities.
That being said, there are better places to find volatility than the cybersecurity sector. I still think you’d be better off trading penny stocks.
Cybersecurity Stocks #6. Palo Alto Networks, Inc. (NYSE: PANW)
Palo Alto Networks deals in network security, cloud-native security, security analytics, threat consulting, and more.
According to its website, Palo Alto Networks “continually delivers innovation to enable secure digital transformation — even as the pace of change is accelerating.”
Sounds great, but how does it do this exactly?
Palo Alto Networks provides customers with firewall protection. Through cloud-based add-ons, users can extend those firewalls to other areas.
Again, I’ll be the first to admit I don’t fully understand it. But the company has more than 80,000 customers across 150 countries … They must be doing something right.
Cybersecurity Stocks #7. Zscaler, Inc. (NASDAQ: ZS)
Information security company Zscaler provides clients with security-as-a-service protection, eliminating the need for gateway appliances.
In plainer terms, Zscaler’s cybersecurity platform is software-based. There’s no need to deploy hardware devices to users.
The San Jose, CA company was founded in 2007 by Jay Chaudhry and K. Kailash. In 2018, Zscaler had its IPO and surged 106% on the first day of trading. And the company has grown impressively larger since…
At the time of this writing, Zscaler operates 150 data centers across 185 countries. Meanwhile, the stock is trading for $243 — 1,400% higher than its IPO price of $16 per share.
This makes Zscaler stock the biggest winner on this list when comparing total gains from IPO date to present.
The market never lies. Right now it seems to be sending positive messages about Zscaler and cybersecurity stocks at large.
The Cybersecurity Stocks to Watch Conclusion
Why watch the cybersecurity sector?
Just decades ago, we rented movies at Blockbuster and bought CDs at the Virgin Megastore. We had newspapers delivered and saved receipts for taxes. And we took pictures on film and had to wait for them to be developed.
Now we do all these things digitally. This gives hackers new targets and cybersecurity stocks fresh business.
Traders should consider what the future could hold for cybersecurity stocks…
On one hand, big tech companies grow bigger every year. And almost every week brings a new tech IPO.
New digital information has created an all-you-can-eat buffet of ransomware targets for cybercriminals. Cybersecurity companies love this. They’ve received a windfall of customers looking for data protection in recent years.
I don’t see this trend stopping any time soon. Cybersecurity stocks could be a solid sector for the foreseeable future.
On the other hand, a cybersecurity company could fail to protect vital data for a huge corporation or government entity…
That would likely destroy the stock. It could even send cybersecurity stocks into a bear market.
As impressive as some of this technology sounds, be careful. Hackers and cybercriminals have proven they can cause serious damage.
Be aware of these risks when considering a long position in any of these companies…
Ultimately only you can decide if cybersecurity stocks fit your strategy.
What do you think about cybersecurity and trading these stocks? Let me know in the comments!
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