12 Best Cybersecurity Stocks to Buy Now

Published on August 22, 2022 at 9:11 am by Affan Mir in Hedge Funds, News

In this article, we discuss 12 best cybersecurity stocks to buy now. If you want to skip the detailed analysis of the cybersecurity market, go directly to 5 Best Cybersecurity Stocks to Buy Now.

According to Fortune Business Insights, the global cyber security market size is expected to reach $376.32 billion by 2029 from $139.77 billion in 2021, at a CAGR of 13.4%. The primary cause of this growth is the e-commerce market as these businesses are focusing on integrating network security solutions into their IT and electronic security systems.

COVID-19 Impact

Due to the transition to “work from home” setups, the environment has been made more susceptible to cyberattacks including intrusions, Man-in-the-Middle (MITM) attacks, and spear phishing. According to a report, 47% of individuals fall for phishing scams while working from home, and the average cost of a data breach resulting from remote working can be up to $137,000. Furthermore, between February and May 2020, close to half a million people were victims of personal data breaches, and video conferencing feeds were stolen and sold on the dark web.

Before the pandemic, only 20% of the cyberattacks were unseen and the number rose to 35% during COVID-19. The new attacks have adopted a form of machine learning that adapts to its environment and they pass through without being seen.

As a solution, countries around the globe are investing in cybersecurity solutions. According to a European Cyber Security Organization report, the U.K government financed approximately $2.3 billion for network and internet security projects in defence and research.

Current Geopolitical Tensions

In 2021, the United States government raised IT and security compliance funding by $1.5 billion to $4.4 billion to meet its cybersecurity requirements. In 2022, the Russian invasion and the current tensions between the USA and China over the territory of Taiwan are also set to benefit the cyber security stocks.

Broadcom Inc. (NASDAQ:AVGO), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Fortinet, Inc. (NASDAQ:FTNT) are some of the most notable names leading the cybersecurity sector.

Photo by Jefferson Santos on Unsplash

Our Methodology

We closely assessed and researched the cybersecurity market and picked the 12 best stocks based on their financials, growth prospects, and other metrics. The stocks were listed according to their market cap as of August 15.

The hedge fund sentiment around the stocks was taken from the Insider Monkey database of 912 elite hedge funds as of Q1 2022.

Best Cybersecurity Stocks to Buy Now

12. Rapid7, Inc. (NASDAQ:RPD)

Market cap as of August 15: $4.13 billion

Rapid7, Inc. (NASDAQ:RPD) is an American company headquartered in Boston. The company provides cyber security solutions. It serves technology, energy, financial services, healthcare, manufacturing, media, retail, education, real estate, transportation, government, and professional services industries globally.

Between 2017 and 2021, Rapid7, Inc. (NASDAQ:RPD) reported a CAGR of 28% and its recurring revenue represented a CAGR of 33% from Q4 2018 to the same quarter in 2021. For the second quarter of 2022, the company reported a revenue of $167.4 million, showing a growth of 32.5% on a YoY basis.

What makes Rapid7, Inc. (NASDAQ:RPD) different from its competitors is its unified Insight cloud platform. One application provides cloud security, threat intelligence, vulnerability risk management, and application security across an entire organization. Furthermore, the company’s majority of revenue is generated from up-sells and cross-sells across its product lines. At the end of 2021, the company reported that 92% of its revenues are recurring from its existing book of customers.

Broadcom Inc. (NASDAQ:AVGO), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Fortinet, Inc. (NASDAQ:FTNT) along with Rapid7, Inc. (NASDAQ:RPD) are some significant cybersecurity stocks to buy now.

11. Varonis Systems, Inc. (NASDAQ:VRNS)

Market cap as of August 15: $3.504 billion

Varonis Systems, Inc. (NASDAQ:VRNS) is a software company that provides a security software program to track, visualize, analyze, and protect unstructured data. The company is headquartered in New York and has R&D offices in Israel. Varonis Systems, Inc. (NASDAQ:VRNS) has a competitive advantage due to its patented technology used for its Data Security Platform. It allows businesses to identify and stop cyberattacks by examining data, account activity, and user behaviour.

Varonis Systems, Inc. (NASDAQ:VRNS)’s Q2 2022 earning reports show an ARR growth of 30% YoY to $426.3 million. The revenue of the company in the quarter was $111.45 million, a 26% increase compared to the last year.

Following the earnings reports on August 2, Cowen analyst Shaul Eyal reaffirmed an Outperform rating on Varonis Systems, Inc. (NASDAQ:VRNS)’s shares and a price target of $53, down from $62. The analyst noted that the company put out strong in-line results and raised FY 2022 outlook despite the Russia and FX headwinds.

10. Qualys, Inc. (NASDAQ:QLYS)

Market cap as of August 15: $5.906 billion

Qualys, Inc. (NASDAQ:QLYS) is a California-based company that uses software as a service model to provide vulnerability management solutions to over 10,000 customers in 130 countries. At end of Q1 2022, 23 hedge funds had a stake in Qualys, Inc. (NASDAQ:QLYS), with Fundsmith LLP holding the most prominent position in the company, valued at $133.698 million.

At the end of the second quarter of 2022, Qualys, Inc. (NASDAQ:QLYS) reported an EPS of $0.89, a 12% increase from last year and beating the estimate of $0.80. The revenue of $119.9 million surpassed the estimates by $2.37 million. Qualys, Inc. (NASDAQ:QLYS) raised its revenue guidance for FY2022 to $488-$489.5 million from $484-$486.5 million. The GAAP net income per diluted share is expected to be between $2.39 to $2.44, compared to the previous guidance of $1.91 to $1.95.

On August 9, Wedbush analyst Daniel Ives reiterated an Outperform rating on Qualys, Inc. (NASDAQ:QLYS) and lowered the price target to $150 from $160. Ives noted that the company delivered robust second-quarter results that surpassed the Wall Street consensus and the company shows deal momentum in its respective field.

Here is what Polen Capital had to say about Qualys, Inc. (NASDAQ:QLYS) in its Q1 2022 investor letter:

“Information technology security company Qualys experienced a slight acceleration in revenue over the quarter in response to heightened cybersecurity concerns. With a compelling free cash flow yield coupled with improved results, we believe the IRR is very compelling. We have also been pleased to see the company’s new management team investing more aggressively in the business, alongside what we believe will be growing demand for cybersecurity software. We believe there is more buyer urgency for offerings like Qualys’ as a result of Russia’s war with Ukraine and recent high-profile attacks. This should drive increased momentum in the business which Qualys’ is increasingly well-positioned for given recent investments in sales and marketing.”

9. CyberArk Software Ltd. (NASDAQ:CYBR)

Market cap as of August 15: $6.124 billion

CyberArk Software Ltd. (NASDAQ:CYBR) is an American InfoSec company focusing on identity management, operating globally. Its solutions include risk-based credential security and session management.

CyberArk Software Ltd. (NASDAQ:CYBR) reported a loss per share $0.27 in its Q2 report, outperforming the estimates by $0.03 and a revenue of $142.3 million, which represented a 21.4% YoY growth. The company’s ARR was recorded at $465 million, 48% more than the $315 million ARR recorded in the same quarter of 2021. Furthermore, the company updated its guidance for the next quarter and the full year. For Q3, the company expects the total revenue to be in the range of $147-$153 million against the $148.77 million consensus. The adjusted net income loss is expected to be between -$11 to -$6 million or -$0.27 to -$0.14 EPS. For the full year, the company is looking at a revenue range of $589 million to $601 million vs 591.47 million estimates. The net loss per share expectations is in the range of -$0.82 to -$0.57 per diluted share. CyberArk Software Ltd. (NASDAQ:CYBR) is looking forward to an ARR growth of 38% to 40% at the end of 2022.

On August 11, Wedbush analyst Daniel Ives maintained an Outperform rating on CyberArk Software Ltd. (NASDAQ:CYBR) and raised the price target to $170 from $150. Ives revised his price target in light of the strong Q2 results that outperformed the Wall Street consensus and the company’s ARR growth.

Here is what Harding Loevner had to say about CyberArk Software Ltd. in its Q3 2021 investor letter:

“By sector, stock selection in Information Technology (IT) and Health Care led performance, while our Industrials holdings lagged. In IT, security company Cyberark reported accelerating revenue growth for its subscription software, a sign that the company’s decision to transition away from a traditional software licensing business model was wise.”

8. NortonLifeLock Inc. (NASDAQ:NLOK)

Market cap as of August 15: $13.736 billion

NortonLifeLock Inc. (NASDAQ:NLOK) is a software company primarily focusing on cyber security software. On August 4, the company received provisional approval from the U.K Competitions and Market Authority for its acquisition of Avast plc. Upon the completion of the acquisition, this will be the company’s 20th acquisition since 1993. In the second quarter of 2022, Millennium Management, an investment management firm, increased its stake in the company by 1575% to $94.786 million.

NortonLifeLock Inc. (NASDAQ:NLOK) released its FQ1 2023 report on August 4. The company reported an EPS of $0.45, compared to the $0.44 estimate. The revenue of $708 million lagged behind the estimates by $12 million, yet represented a YoY growth of 2.5%. Furthermore, due to the reduction of its operating expenses, the company’s non-GAAP operating margin represented a 250 bps growth to 53.7%. At the end of the quarter, the company had cash and cash equivalents of $1.29 billion and decreased its long-term debts by approximately $300 million from the previous quarter. During the quarter, NortonLifeLock Inc. (NASDAQ:NLOK) generated a free cash flow of $213 million.

Here is what ClearBridge Investments had to say about NortonLifeLock Inc. (NASDAQ:NLOK) in its Q4 2021 investor letter:

“However, not every example has a cyclical dynamic. Consumer cybersecurity company NortonLifeLock undoubtedly benefited from the COVID-19 pandemic lockdowns as sales of personal computers and time spent online skyrocketed, as did subscriptions to the company’s security products. The market has lumped Norton into the “COVID winners” bucket and embedded a substantial reduction in subscriptions going forward as the company laps its strong results from the depths of the pandemic. While these concerns are reasonable for many within the COVID winner cohort, it is not the case for Norton. Company-specific improvements in marketing and product development have been just as powerful tailwinds to subscriber growth and would have continued to carry the company’s growth through the most difficult comparisons from 2020 even without the pandemic effect. The market’s concern about tailwinds turning to headwinds is overwrought, and contrary to the decline currently embedded in the stock price, we are confident that Norton’s earnings will continue to compound. Similar to EQT and OneMain, NortonLifeLock has been actively putting its ample cash flow generation to work to crystalize upside for shareholders. In addition to strong dividends and share repurchase activity, last year Norton announced the acquisition of “freemium” competitor Avast. Already attractive from a pricing standpoint, the acquisition creates the potential to generate immense cost and revenue synergies as well as providing Norton a strong foothold outside the North American market and a broader customer acquisition funnel. Once the transaction closes in 2022, Norton will have growing free cash flow generation of $1.5 billion and a clear path to an EPS of $5, yet a resulting valuation of just 5x earnings power. Given the high-single-digit revenue growth that Avast brings to the table, we believe the continuation of a valuation this depressed for Norton is highly unlikely.”

7. Leidos Holdings, Inc. (NYSE:LDOS)

Market cap as of August 15: $13.787 billion

Leidos Holdings, Inc. (NYSE:LDOS) is an American defence, aviation, information technology, and biomedical research company. It also provides military-grade cybersecurity to the US government and military agencies. The company is most likely to benefit from the current geopolitical situations such as the Russia-Ukraine conflict and China-USA tensions.

Leidos Holdings, Inc. (NYSE:LDOS) reported an EPS of $1.59 vs the $1.56 consensus for the second quarter of 2022. The company also outperformed its revenue estimates of $3.52 billion after generating $3.6 billion. Moreover, the company’s net bookings stood at $2.2 billion, showing a book-to-bill ratio of 0.6. The company reaffirmed its FY2022 guidance of $13.9 billion – $14.3 billion in revenue and non-GAAP EPS of $6.10 – $6.50.

On the earnings report day, Leidos Holdings, Inc. (NYSE:LDOS) declared a quarterly dividend of $0.36, payable by September 30 to the shareholders of record on September 15. As of August 15, the company has a dividend yield of 1.44%.

6. NetApp, Inc. (NASDAQ:NTAP)

Marketcap as of August 15: $16.399 billion

NetApp, Inc. (NASDAQ:NTAP) is a California-based hybrid cloud data services and data management company. As of Q1 2022, 37 hedge funds held bullish positions in the company.

As of August 15, NetApp, Inc. (NASDAQ:NTAP) is fairly valued with a P/E ratio of 18.2 and has an attractive dividend yield of 2.67%. In March, the company announced that it distributed 105% of free cash flow via dividends and repurchases to its shares holders. Furthermore, the company pledged to distribute 100% of FY2023 free cash flow to its shareholders. On June 06, the company CFO, Mike Berry, also bought 5000 shares at $72.04 worth $360,000. The last quarterly dividend of $0.50 was paid out on July 27 to the shareholders of record on July 8.

On July 14, JPMorgan analyst Samik Chatterjee maintained an Overweight rating on NetApp, Inc. (NASDAQ:NTAP)’s shares and lowered the price target to $85 from $100. The analyst took a “defensive stance” on the networking and hardware coverage sector due to expected challenging macro feed into demand trends.

NetApp, Inc. (NASDAQ:NTAP) is one of the prominent cybersecurity stocks to buy now along with Broadcom Inc. (NASDAQ:AVGO), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Fortinet, Inc. (NASDAQ:FTNT).

Here is what Miller Howard Investments had to say about NetApp, Inc. in its Q3 2021 investor letter:

“Technology remains important in our portfolios, although the sector weights have come down over the past year. We now hold NetApp (NTAP) of which has strong growth prospects, yet attractive valuations in our view. Unlike many younger tech companies, we believe our holdings should significantly benefit from an upturn in the economy.”

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