Three Promising Stocks from the Online Security Industry

One of the biggest threats to corporate America is ransomware. The growing possibility of losing access to essential or confidential digital property is a nightmarish scenario for executives as the financial consequences can be enormous. But it’s not just major companies that are at risk. We are all threatened with the loss of personal data security as hackers continue to develop new ways to exploit networks, software, and the array of evolving technology services. As the world advances to become more digitized, so too do its threats.

According to Global Newswire, the global network security market size reached a valuation of $20.30 billion in 2021 and is projected to grow from USD 22.60 billion in 2022 to USD 53.11 billion by 2029, exhibiting a CAGR of 13% during the forecast period. The emergence of several startups and the rising adoption of 5G services are expected to boost the market growth. 

Online security is a young, quickly evolving industry.  Competition is heavy in the space and demand continues to grow faster in both volume and complexity.  Not all companies from the burgeoning subsector are set to last.  In this article our team examines three attractive tickers set to benefit as demand for protections from cyber abuses continues to grow.

Palo Alto Network Inc. (PANW)  

Palo Alto Network Inc. is a leader in the cybersecurity industry across 13 different categories.  For eleven years straight the company has been named as a market leader in network firewalls by leading research and advisory company, Gartner.  

The company is coming off a fiscal 2023 second quarter (ended Jan. 31) where demand for its solutions appeared to accelerate.  In Q2, the number of deals Palo Alto closed that were worth $10 million or more soared by 144% year over year, which is clear evidence of that demand. And the company has accelerated its innovation flywheel with $1 billion in research and development spending over the last 12 months, which is up to five times more than some of its competitors have spent.

Palo Alto ended Q2 with $8.8 billion in remaining performance obligations (RPOs), up 39% year over year, which was faster than its 38% growth rate in the first quarter. It’s the key number to watch because it represents the company’s pipeline of work, which is expected to convert into revenue over time. 

Of the 43 analysts who cover Palo Alto Networks stock, 34 of them have given it the highest possible buy rating.  None of the analysts currently recommend selling. 

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CrowdStrike (CRWD)

Investors have been pouring into rapidly developing AI tech names over the past few months and this is likely just the beginning.  According to Grand View Research, the global artificial intelligence market reached a valuation of $136.55 billion in 2022.  It’s projected that by 2030 the industry will command a revenue of nearly $1.9 trillion.  

Anyone looking to profit from the paradigm shift may be wondering which companies stand to gain the most as breakthrough advancements are made in the industry.  Today we’ll look at a Buy rated standout from the burgeoning AI group with an average projected upside of more than 40%.  

With cyber threats materializing all the time, cybersecurity technology specialists, CrowdStrike is one of the most relevant AI stocks to buy.  After losing nearly half of its value in 2022, CRWD is up 6% this year.  Of 42 analysts offering a recommendation for the stock, 38 have an optimistic view, yielding a consensus Strong Buy assessment.  In addition, their average price target stands at $166.88, implying an upside potential of over 40%. Therefore, CRWD is one of the top AI stocks to buy.

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Booz Allen Hamilton (BAH)

Booz Allen Hamilton is one of the world’s largest providers of cybersecurity solutions.  Specializing in marketing cybersecurity products that are produced by other companies, nearly every U.S. federal, intelligence and defense agency uses its services.  In other words, Booz Allen is poised to scoop up a significant portion of the whopping 15.6 billion that the U.S. is expected to spend on cybersecurity in 2023.

For its fiscal 2023 second quarter, ended September 30, revenue surged 9.16% year over year to $2.3 billion, while its net income jumped an impressive 10.4% to $170.93 million.  Booz Allen reported quarterly earnings of $1.25 per share, exceeding Wall Street expectations of $1.13 per share.  The company raised its full-year EPS view to $4.24-$4.50 from $4.15 – $4.45 Wall Street is expecting $4.88 EPS for the full year indicating a reasonable forward P/E of 24 times.  

Cowen analyst Cai von Rumohr recently raised the firm’s price target on BAH to $123 from $109 after hosting the company at the firm’s London Industrials & Renewables Summit and coming away with a favorable outlook, driven by continued demand tailwinds and an easing labor market. 

The current consensus recommendation is to Buy BAH.  A median price target of $115 implies a 21% upside.  The stock comes along with a 1.66% dividend yield.

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