Since the COVID-19 outbreak began, investments in cybersecurity have skyrocketed. With the widespread adoption of cloud computing and remote labor, businesses now confront new security risks. As a result, the demand for cutting-edge security software propelled numerous cybersecurity companies to record-breaking levels in 2020 and 2021. Even though the bear market of 2022 took a heavy toll on the best-performing equities, investors will still be paying attention to cybersecurity in 2024 and beyond. In this article, we will discuss the best cybersecurity stocks and ETFs to invest in in 2024.
What are Cybersecurity Stocks?
Cybersecurity stocks represent shares in companies that specialize in providing solutions to protect digital systems, networks, and data from cyber threats. These threats include malware, ransomware, unauthorized access, and other cyberattacks. Investing in cybersecurity stocks has gained prominence due to the escalating frequency and sophistication of cyber threats in our increasingly digital world.
Prominent cybersecurity companies often offer a range of products and services, such as antivirus software, firewalls, encryption tools, and threat detection systems. As cyber threats continue to evolve, these companies strive to stay ahead by developing innovative technologies to safeguard sensitive information for individuals, businesses, and governments.
Investors are drawn to cybersecurity stocks due to the growing demand for robust cybersecurity measures, driven by the digitization of businesses and the escalating frequency of cyberattacks. The performance of cybersecurity stocks is closely tied to the overall cybersecurity landscape, governmental regulations, and the ability of these companies to adapt to emerging threats, making them a key focus for those looking to capitalize on the ongoing importance of digital security.
Why Should You Consider Investing in Cybersecurity Stocks?
The number of data breaches in 2021 rose to a new high, with the ID Theft Resource Center reporting a 68% increase from the previous high in 2020 and a 23% increase from the previous high in 2017. The number of data compromise events stayed near that all-time high in 2022, while the overall number of individual victims that were affected climbed almost 42% year-over-year in 2022.
Furthermore, investing in cybersecurity stocks worldwide is predicted to approach $200 billion in 2024 (up roughly 12% from 2022) and is expected to be a high-growth market for years to come, according to research from IDC. If you know what you’re doing in the cybersecurity stock market, you can make a killing in the next decade.
Best Cybersecurity Stocks
Some of the best cybersecurity stocks for 2024 and beyond are listed below.
#1. Okta
Okta (OKTA, $67.77) is a frontrunner in the identity technology sector, and its products facilitate safe logins and robotic procedures. This applies to many different types of software, including web and mobile apps, as well as internal servers and APIs.
Okta has the advantage of being neutral in the identity industry, where there are many major competitors, such as blue-chip company Microsoft (MSFT). There is no alternative software on offer that may potentially alienate customers.
Okta has also established a significant ecosystem. Approximately 7,000 pre-built integrations are available now from the company.
The success of Okta might be attributed to long-term tendencies in the market. The transition to a hybrid workforce increases the importance of protecting data in transit and at rest.
Zero-trust security architectures are also a growing trend. This presumes that a company will be breached, necessitating more robust cybersecurity measures for things like breach response and recovery.
Furthermore, Okta’s rapid expansion is hardly surprising. During its fiscal second quarter ended July 31, revenues soared by 23% year-over-year to $556 million and free cash flow came to $49 million vs. negative $24 million in the year-ago period.
OKTA’s over 18,000 clients are another justification for the company’s inclusion on this list of the finest cybersecurity stocks. OpenAI, the maker of the immensely popular ChatGPT program, is one of the more recent examples.
For example, Okta’s platform can be leveraged to enter the Security Information and Event Management (SIEM) industry. That is to say, we can anticipate sustained growth for many years to come.
#2. Fortinet
Network security is at the heart of Fortinet (FTNT, $50.82). Solutions comprise things like virtual private networks (VPNs), secure online gateways, data leak prevention systems, and firewalls. In addition to increased safety, these also boost network speed.
Fortinet also provides encryption applications, universal zero-trust network access, and security for local and wide-area networks in addition to these technologies.
According to Hendi Susanto, portfolio manager at Gabelli Funds, “What Fortinet does well is that it offers multiple security functions on one platform at an attractive price as a bundle.”
Revenue in the third quarter increased 16% year-over-year to $1.33 billion, driven mostly by a 27.6% increase in service revenue to $680.8 million. There was a total of $551.2 million in operating cash flow.
The number of the company’s clients exceeds 680,000. The vast majority of Fortune 500 and Global 2000 firms fall within this category.
Fortinet has spent a lot of time and money developing AI solutions over the years. The company now uses complex algorithms to analyze over a hundred billion cyber events every day. This has improved both the real-time prevention and remediation of security breaches.
In addition, investors in search of the top stocks in the cybersecurity industry should give FTNT a closer look.
#3. CyberArk Software
CyberArk Software is an identity security platform provider (CYBR, $183.95). It offers features such as directory help and lifecycle management in addition to single sign-on and multi-factor authentication. These can be used on a private network, in the cloud, or in a hybrid cloud environment. For analytics, too, there are a plethora of options.
For the third quarter, CYBR revenues climbed by 25% to $191.2 million. There was a 65% increase in subscription business revenue to $122.9 million. That is to say, the cloud strategy the corporation has adopted is gaining significant ground.
CyberArk now serves over 8,000 customers in 110 different countries. Half of the Fortune 500 companies and nearly a third of the Global 2000 are among its clientele. Also, CyberArk’s solution provides the features that businesses require, such as a robust identity system.
“We are the only company with an Identity Security platform that can offer our customers the flexibility to provide standing access, just-in-time access, or zero standing privileges, depending on the type of identity and the nature of the target they need to access,” CEO Matt Cohen stated during CyberArk’s third-quarter earnings “What differentiates our platform even further is that we can do this across hybrid and cloud-native environments.”
Because of this, CyberArk is a top pick among cybersecurity stocks to invest in 2024.
#4. Palo Alto Networks
One of the leading vendors of cybersecurity solutions is Palo Alto Networks (PANW, $253.51). Robust network security, secure access service edge (SASE), and cloud security are all possible with the help of the company’s software and technology. Threat intelligence consulting is another option.
Palo Alto Networks is so large that it can afford to put away nearly $1 billion annually for R&D. In comparison to its pure-play competitors, this is a huge outlay. Since the corporation has invested heavily in research and development, it has introduced numerous improvements and new products.
These bets are paying off for one of the greatest cybersecurity stocks on Wall Street. Revenue for the fiscal fourth quarter of Palo Alto Networks, which concluded on July 31, grew 26% year over year to $2.0 billion. Revenue of $3.2 billion was up 18% year over year.
Analyst at Morgan Stanley Hamza Fodderwala believes PANW will continue to lead the cybersecurity industry and see billing growth in the high teens. With an overweight rating (equal to a buy) and a price target of $304, the analyst sees a 20.9% potential upside for PANW shares compared to their current price.
#5. CrowdStrike Holdings Inc. (CRWD)
CrowdStrike Holdings (CRWD -1.77%), a cloud-native software firm, provides endpoint security, or protection, for networked devices including computers, smartphones, and tablets. Because it’s cloud-based, CrowdStrike is particularly well-suited for facilitating remote work.
CrowdStrike is able to detect security breaches and locate threats because the software employs machine learning, a form of artificial intelligence. It’s also simple to roll out to the billions of internet-connected devices and the millions of remote workers. Consistent data protection across an organization’s IT infrastructure is now possible thanks to the company’s new integration agreements with other tech companies and the steady growth in the number of modules available on its platform.
CrowdStrike’s sales have been rising despite the fact that the company’s premium-priced shares took a major hit in 2022. Free cash flow is another indicator that this venture is highly profitable. CrowdStrike has the potential for rapid expansion as the number of accessible mobile devices continues to rise.
#6. SentinelOne
SentinelOne (S 1.23%), like many other pure-play cybersecurity companies, has recently gone public. With a valuation of $10 billion and a cash haul of $1.2 billion, SentinelOne’s IPO in June 2021 was the largest of its kind for a cybersecurity firm. However, a hard go for the stock market in 2022 and decreasing revenue growth at SentinelOne have dropped the company below its IPO price.
Also, this little business still managed to more than quadruple its revenue in 2022 as compared to the previous year, despite the slowdown. It forecasts a 50% rise in revenues for 2023. SentinelOne’s quick growth is allowing them to take the first steps toward achieving profitability. It operates a cloud-based endpoint security technology, which puts it in rivalry with CrowdStrike. There has been positive market reception for its ability to automatically detect and eliminate cybersecurity threats.
#7. Zscaler
Founded in 2007, Zscaler (ZS, $175.04) is one of the early players in the cloud-based cybersecurity market. Zscaler Zero Trust Exchange is the foundation of the company’s infrastructure. It’s an alternative to how security has typically been handled, which has centered on inside company networks.
Furthermore, the Zscaler Zero Trust Exchange offers a number of advantages. With this, users can access cloud-based programs in a safe and dependable manner. This technique can also protect workloads in both public and private clouds. There is also a method for safeguarding IoT (Internet of Things) gadgets.
Zscaler’s Zero Trust Exchange is built around a large infrastructure. More than 320 billion transactions and 9 billion security breaches are averted daily thanks to it. More than 500 trillion signals are emitted every day, and this information has proven invaluable in the advancement of AI and ML. For this reason, ZS is not only frequently included among the best cybersecurity stocks but also among the best artificial intelligence stocks.
Within the fourth month of the fiscal year, which ended on July 31. Zscaler’s sales were $455.0 million, an increase of 43% year over year. The firm has $2.1 billion in the bank and a free cash flow of $101.3 million.
Zscaler’s creativity has been a driving force in the company’s expansion. More than 150 enhancements were included in the most recent major update of its cloud software.
Customers have shown their appreciation for the company’s dedication to innovation. Take into account that ZS has a Net Promoter Score (NPS) of 80+, where NPS is a measure of how likely customers are to suggest the product. In addition, the ratio is more than twice as high as is typical for SaaS (software as a service) providers.
How to Invest in Cybersecurity Stocks
Remember that cloud-native companies have a competitive advantage with the latest software technology when thinking about how to choose the best cybersecurity stocks. However, successful companies have large profit margins and plenty of resources to invest in modernization. Companies that manage web content and applications are becoming increasingly vital to the online security of a business.
Also, cybersecurity ETFs are another great option and can be purchased with your favorite cybersecurity stocks. Since the price of a single share of stock can fluctuate greatly from month to month and year to year, it’s important to keep your investing horizons broad and your attention on the long-term growth prospects of these rapidly expanding businesses. The cybersecurity industry stands to gain financially from the rapid development and proliferation of tools that help keep digital spaces secure.
Does Cybersecurity Make a Lot of Money?
The cybersecurity industry has seen substantial growth due to increasing cyber threats, digital transformation, and the expanding reliance on technology. This growth has translated into financial success for many cybersecurity companies. Cybersecurity professionals, including experts in ethical hacking, risk management, and threat analysis, are in high demand, leading to competitive salaries.
For cybersecurity companies, the revenue potential is significant as organizations prioritize safeguarding their digital assets. Companies providing cutting-edge solutions often find lucrative opportunities in the market. Additionally, the increasing frequency and sophistication of cyberattacks drive ongoing demand for cybersecurity products and services.
Investors in cybersecurity stocks have, in many cases, experienced favorable returns as the industry continues to expand. However, it’s essential to note that individual financial success can vary based on factors like company performance, market dynamics, and global cybersecurity trends. As the need for robust digital security persists, the cybersecurity sector is expected to remain a financially rewarding field for both professionals and investors.
What Is the Downside of Cybersecurity?
While cybersecurity is essential for protecting digital assets and sensitive information, there are several downsides and challenges associated with it:
- Costs: Implementing robust cybersecurity measures can be expensive. Companies need to invest in technology, training, and personnel to effectively protect against cyber threats.
- Complexity: Cybersecurity systems are complex, and managing them can be challenging. The constant evolution of cyber threats requires ongoing updates and adjustments to security measures.
- False Positives and Negatives: Security systems may generate false alarms (positives) or, conversely, fail to detect actual threats (negatives). Balancing these two aspects is critical for an effective cybersecurity strategy.
- User Resistance: Stringent security measures can sometimes lead to user frustration or resistance, potentially compromising security if users seek workarounds.
- Emerging Threats: Cyber threats are continually evolving, and new attack vectors regularly emerge. Staying ahead of these threats requires constant vigilance and adaptation.
- Privacy Concerns: In the quest for security, there can be concerns about the invasion of privacy. Striking the right balance between security and respecting individual privacy is an ongoing challenge.
- Supply Chain Vulnerabilities: Relying on third-party suppliers and vendors can turn them into security holes if they do not take good care of their online safety.
Understanding these downsides helps organizations and individuals make informed decisions about their cybersecurity strategies, emphasizing the need for a comprehensive and adaptable approach to digital security.
Cybersecurity Stocks ETF
The problem of cybersecurity is enormous. IBM’s (IBM 1.44%) Cost of a Data Breach 2021 report found that the average cost for a company that experienced a data breach event in 2018 increased by 10% to $4.2 million. The growing prevalence of remote workers and the ongoing shift toward cloud-based IT infrastructure are both complicating the task of ensuring data safety. Therefore, cybersecurity is a massive and rapidly expanding market.
Choosing the best stocks in cybersecurity, however, can be difficult. Every industry needs cybersecurity software to ensure the safety of sensitive information and essential infrastructure. There are a lot of organizations operating in this market, each with its unique perspective on creating a security platform. That’s why investing in a cybersecurity stock ETF (exchange-traded fund) might make sense.
It’s not surprising that numerous ETF stocks focus on cybersecurity, given the industry’s rising importance. For the year 2024 and beyond, these are your best options.
#1. First Trust NASDAQ Cybersecurity ETF
The First Trust NASDAQ Cybersecurity ETF manages over $5.6 billion, making it the largest pure-play exchange-traded fund (ETF) focused on this area of the technology industry. First Trust is a sizable financial services provider with a wide range of investment options, and its cybersecurity ETF has been around for a while. It started trading in 2015, and its share price has more than doubled in that time.
There are now 35 equities of cybersecurity companies that make up the First Trust Cybersecurity ETF, and practically all of them are traded on U.S. exchanges. A few stocks in related sectors, like aerospace and defense, have security services as a major component of their business. Approximately 20% of the fund’s assets are invested in three significant technology businesses as of this writing: Cisco Systems (CSCO 0.21%), Palo Alto Networks (PANW 1.91%), and Accenture (ACN 1.56%). The ETF is rebalanced quarterly and has an annual cost ratio of 0.6% ($6 in fees are removed from the fund’s performance each year for every $1,000 invested).
#2. ETFMG Prime Cyber Security ETF
Similarly, the ETFMG Prime Cybersecurity ETF has been operating since 2015 and is now worth $1.9 billion. It has more than doubled in value since inception, is rebalanced quarterly, and has an annual expense ratio of 0.6%.
The ETFMG Prime Cybersecurity ETF has a far larger stock selection (62 stocks) than First Trust’s offering. That means significantly less portfolio concentration of top names in the sector and more of the fund’s assets spread out among smaller enterprises and overseas investments. Some investors may be attracted to the strategy’s greater exposure, although it has lagged behind the First Trust fund since 2015.
#3. Global X Cybersecurity ETF
The Global X Cybersecurity Exchange Traded Fund is a newbie to the market, having debuted in late 2019. Since its inception, it has beaten both First Trust and ETFMG, attracting more than $1.1 billion in investor capital.
One of the most concentrated is the Global X Cybersecurity ETF, which only holds 31 stocks. A disproportionate share goes to the largest cybersecurity software vendors. Nearly a quarter of the fund’s total assets are invested in Check Point Software (CHKP -0.63%), Palo Alto Networks, and Norton LifeLock (NASDAQ: NLOK) as of this writing. Since the primary goal of the cybersecurity sector is expansion, Global X’s product, like the others listed, offers very little in the way of dividends. Despite its youth, it has already surpassed its competitors.
Another 2019 debut: BlackRock (BLK 1.65%)’s iShares Cybersecurity and Technology Exchange Traded Fund (ETF). The yearly cost of 0.47% is lower than many of its competitors, and the portfolio consists of 52 equities from cybersecurity companies and other technology firms involved in cybersecurity.
Despite its youth, the iShares Cybersecurity and Tech ETF has lagged behind rivals in the cybersecurity investment market. But since it has a small history, that could change. Also, compared to other ETFs, this one isn’t the least risky option out there. Cloud infrastructure provider VMware (VMW 0.41%), networking equipment designer Juniper Networks (JNPR 0.52%), and digital document-signing service DocuSign (DOCU 1.52%) are just a few of the cloud computing names with ties to the security industry.
Is Cybersecurity a Happy Career?
The satisfaction of a cybersecurity career can vary among individuals based on their interests, skills, and work environment. Many cybersecurity professionals find fulfillment in the dynamic nature of their work, the challenge of staying ahead of evolving threats, and the opportunity to contribute to the security of digital systems.
Here are some aspects that contribute to the positive perception of a career in cybersecurity:
- Impactful Work: Cybersecurity professionals play a crucial role in protecting organizations and individuals from cyber threats, making their work meaningful and impactful.
- Constant Learning: The field is dynamic, requiring continuous learning to stay updated on the latest technologies and threats. This constant evolution can be intellectually stimulating for those who enjoy learning.
- Diverse Roles: Cybersecurity offers a wide range of roles, from ethical hacking and incident response to policy development and risk management. This diversity allows individuals to find a niche that aligns with their interests and skills.
- Job Security: With the increasing frequency and severity of cyber threats, demand for cybersecurity professionals remains high, providing a sense of job security.
However, challenges such as high-pressure situations, the need for ongoing skill development, and the rapidly changing threat landscape can contribute to stress. Like any career, personal satisfaction in cybersecurity depends on individual preferences and how well the work aligns with one’s passion and skills. Also, read Is Cybersecurity a Good Career?: Should You Go For It in 2024
Is It Good to Invest in Cybersecurity Stocks?: Bottom Line
In conclusion, investing in cybersecurity stocks can be a strategic choice given the increasing frequency and sophistication of cyber threats. The demand for robust cybersecurity solutions continues to grow as businesses and individuals prioritize digital security. However, like any investment, it carries risks. Market conditions, competition, and specific company performance can impact stock values. It’s essential to conduct thorough research, diversify your portfolio, and stay informed about industry trends. Consulting with a financial advisor can provide personalized guidance based on your risk tolerance and investment goals.
Frequently Asked Questions
Why are cybersecurity stocks crashing?
Cybersecurity stocks are down hard compared to last year, but not because the industry isn’t hot. The issue was valuation, concerns over decelerating growth, and warnings of an impending recession.
Is CrowdStrike a good stock to buy?
In my opinion, CrowdStrike stock is attractive in the current market because of the company’s prominence as a leader in the cloud-based cybersecurity industry.
Similar Articles
- TOP 11 BEST STOCK TRADING APPS OF 2023
- How To Download an Image From Google 2023: Do’s and Dont’s
- ROBINHOOD STOCK LENDING: 2023 Review
- Why Is Cybersecurity Important?: All You Should Know
Reference
