Two of the biggest trends of the 2020 novel coronavirus pandemic are working from home and online shopping. The pandemic has put a spotlight on all things internet-related. That, in turn, has had a big impact on cybersecurity stocks.
After all, criminals are hardly sitting still through all this. All the increased activity — and the prospect of sensitive personal and business data now sitting on vulnerable home PCs — is offering unprecedented opportunity. Online shopping is especially tempting. There are a lot of credit card numbers flying around. Many companies are offering solutions, and seeing their business get a big boost as a result.
These seven cybersecurity stocks stand out as offering real growth potential as online spending surges and working from home goes mainstream.
- Akamai Technologies (NASDAQ:AKAM)
- ServiceNow (NYSE:NOW)
- NortonLifeLock (NASDAQ:NLOK)
- CrowdStrike Holdings (NASDAQ:CRWD)
- SolarWinds (NYSE:SWI)
- Qualys (NASDAQ:QLYS)
- Zscaler (NASDAQ:ZS)
If you’re worried about their prospects fading when a vaccine is available, don’t. The increased interest in online shopping is expected to be permanent — it’s just way too convenient to give up. Working from home is another trend that’s expected to continue for many employees. And, as we have learned, there is a never-ending parade of exploits that cybercriminals can leverage. The battle is never going to wind down, and that means a bright future for these cybersecurity stocks.
Cybersecurity Stocks: Akamai Technologies (AKAM)
Akamai Technologies is best known for its global content delivery network (CDN).
This network and the amount of traffic on it is vast. Akamai estimates that at any given moment 15% to 30% of the entire world’s internet traffic is being handled by its data centers.
The company counts some of the country’s largest online retailers among its customers. They rely on Akamai’s CDN to make their online shopping experience fast, reliable and secure. Akamai’s security solutions protect these customer websites from a wide range of threats including bot attacks, malware and theft of personal data. They ensure all those online shoppers have a good experience and keep coming back.
In its latest earnings report, Akamai beat expectations with revenue up 12% year-over-year and earnings per share of 95 cents. It’s stumbled since the September tech stock selloff, but AKAM stock is still up 14% at this point in 2020.
ServiceNow’s focus has been on the working-from-home crowd. It especially focuses on employees who are accessing critical company data using a laptop over their home Wi-Fi network. This is a cybersecurity nightmare for IT departments. That’s where ServiceNow products like its Safe Workplace suite come into play. In particular, Safe Workplace manages the transition between working from home and a return to the office — allowing companies to remain 100% functional and employees fully connected through the various stages.
NOW stock earns an A rating in Portfolio Grader. Few other companies are as well positioned to not just take advantage of the pandemic’s work-from-home stage, but to also integrate employees once working from home becomes a regular option for some.
In its third quarter, ServiceNow reported revenue of $1.15 billion (up 30% YOY). Subscription revenue was up 31% which is always a good sign — customers are signing up for the long term, not just managing the immediate effects of the pandemic. NOW stock has been on a steady upward trajectory since going public in 2012, and so far in 2020 it’s posted impressive growth nearing 80%.
If there’s one company on this list of cybersecurity stocks that everyone will recognize, it’s NortonLifeLock. Everyone who’s ever owned a computer knows about Norton Utilities, Norton 360 and the various other Norton security products.
The company has been transitioning to a modern era, with security offerings covering mobile devices as well as PCs. And Norton offers subscriptions like Norton 360 that provide security for entire families across multiple devices. Its business has been down for much of 2020, which is a big part of the reason why NLOK stock has slumped 23% so far this year. It’s also a big part of its B rating in Portfolio Grader. Consumers just aren’t shelling out for software at this point.
So why is NLOK stock on this list? I think the company is feeling a temporary pinch from consumers cutting back on their spending. With the trend toward increased online shopping, I expect that people will begin investing in protection for their devices once they’re feeling a little better about the economy. NLOK is going through a rough patch in 2020, but that only makes its current price more attractive.
California’s CrowdStrike is a cloud-based endpoint security solution. It protects business and enterprise customers against cyber attacks and data theft. The company’s anti-virus technology leverages machine learning to proactively protect against attacks.
CrowdStrike is one of the best-performing cybersecurity stocks of 2020. After starting the year just under $50, CRWD topped $152 at one point in October. Even after a rocky month (there was some concern that the crowded market for endpoint security could limit the company’s growth prospects), CRWD stock is still up over 175% for the year.
Many investment analysts are optimistic about CrowdStrike’s prospects for continued growth. Most recently, Baird analyst Jonathan Ruykhaver raised his price target for CRWD stock to $155 from $150, also raising his rating from “neutral” to “outperform.”
SolarWinds has been in the cybersecurity business for over 20 years. During that time it has gone public twice — the latest in October 2018 after two years of private ownership. Since then, SWI stock has been moving in the right direction. Investors who bought in October 2018 have seen their shares increase in value by 49%.
Building on its core network management solutions, SolarWinds has made numerous acquisitions to bolster its enterprise offerings.
A big part of that has been IT security management tools.
In Q3, SolarWinds reported revenue of $260.98 million (up 8.5%) and EPS of 28 cents (up by 33.3%), beating Wall Street estimates on both. It’s important to note that subscription revenue hit $100.6 million for the quarter, up 21%. That’s good news because it means more customers are locking in for the long term, adding recurring revenue. In addition, the company expects to break $1 billion in full year revenue for fiscal 2020.
SWI stock has gained nearly 21% in 2020 and is well-positioned to ride the cybersecurity wave to continued growth.
Qualys is a cloud security company. And while QLYS holds a B rating in Portfolio Grader, I like it even better than some A-rated stocks in its sector.
Why? Qualys specializes in endpoint security, protecting critical enterprise systems and data that is being accessed by remote employees. That business has obviously increased during the pandemic. At the start of November, Qualys raised its full-year guidance for both revenue and earnings. With more and more companies — including some of the biggest tech giants — signaling that many of their employees will be working from home on a permanent basis, the demand for endpoint security solutions is going to keep growing.
QLYS stock has posted modest gains in the 10% range so far in 2020. However, this is another of those cybersecurity stocks that I feel has legs. If you factor the past 10 weeks out of the equation, its growth over the past five years looks much more impressive at 243%. With working from home driving adoption of endpoint security, I don’t see that growth plateauing any time soon.
Zscaler is another cloud security company that is seeing a big business increase as a result of the pandemic. Its customers route their business and app traffic through 150 data centers, globally, where Zscaler’s security solutions protect against everything from malware and ransomware to data interception. Naturally, the shift to having employees work from home means a big increase in demand for Zscaler’s services.
Chances are, you may not have heard of Zscaler — at least before the stellar performance of ZS stock in 2020. It’s only been publicly traded since 2018, but Zscaler counts more than 100 of the Fortune 500 among its customers. It claims some 4,000 customers and processes 100 billion transactions per day during peak periods. This is no small player.
In its latest quarter, Zscaler reported revenue of $125.9 million, up 46% YOY. For the full year, revenue is up 42% compared to 2019. That rapid growth in revenue explains why ZS stock is up 200% so far in 2020. Don’t expect the growth story to end any time soon for this cybersecurity stock.
— Louis Navellier and the InvestorPlace Research StaffCould This Stock Be the Best EV Play of 2022? [sponsor]
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Source: Investor Place