In this article, we will discuss the 12 Most Undervalued Cybersecurity Stocks to Buy According to Hedge Funds.
With businesses facing a significantly complex cyber threat landscape, it is of utmost importance to stay ahead of trends in cybersecurity. Industry experts believe that, in 2025, the integration of AI in threat detection and acceleration in post-quantum encryption should define the landscape of the broader cybersecurity industry. Splashtop reported that the transition to a Zero-Trust framework demonstrates a significant shift in cybersecurity, emphasizing continuous verification and minimal access to enhance overall network security.
Global X Cybersecurity ETF saw an increase of more than 20% over the past year. What has led to this rally? Given the recent adoption of AI technology, market experts believe that the need for cybersecurity is significantly important. With several companies integrating GenAI into their operations, there has been a significant increase in cyberattacks. This led to increased demand for product offerings of cybersecurity companies.
Cybersecurity Industry- The Road Ahead
As per Fortune Business Insights, the global cybersecurity market size was pegged at US$172.24 billion in 2023. This market should grow from USD 193.73 billion in 2024 to USD 562.72 billion by 2032, demonstrating a CAGR of 14.3%. Furthermore, the US cyber security market should see strong growth, touching an estimated value of US$166.73 billion in 2032. This should stem from an increased number of e-commerce platforms. The strong adoption of enterprise security solutions in manufacturing, BFSI, and healthcare should fuel market growth up to 2032.
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Prevention of Cyberattacks
As per EIN Presswire, the quicker expansion of the Internet of Things (IoT) offers a significant opportunity for the broader cybersecurity market. As IoT devices—which range from smart home appliances to industrial sensors— become critical to business operations, there seems to be an increased requirement for effective cybersecurity measures. Several devices often lack strong security protocols. This leads to hacking, unauthorized access, and exploitation.
EIN Presswire added that, amidst these challenges, the cybersecurity industry has a unique opportunity to develop specialized solutions established to secure the IoT ecosystem effectively. This might consist of implementing advanced encryption protocols to protect data transmission, and developing device authentication mechanisms so that only authorized devices can connect to the network. Also, intrusion detection systems can be deployed tailored to monitor and protect against threats related to interconnected devices.
NGFWs (Next Generation Firewalls) protect against evolving practices that use AI to bypass traditional defences, as per Juniper Research. It added that the network layer is the most critical element of IoT networks to protect, with more than 45% of global cybersecurity spending inclined towards protecting the network layer in 2025.
Amidst these trends, we will now look at the 12 Most Undervalued Cybersecurity Stocks to Buy According to Hedge Funds
An engineer typing on a computer, developing the latest cybersecurity application.
Our Methodology
To list the 12 Most Undervalued Cybersecurity Stocks to Buy According to Hedge Funds, we sifted through numerous online rankings and combed through cybersecurity-focused ETFs, such as First Trust NASDAQ Cybersecurity ETF and Amplify Cybersecurity ETF. After getting an initial list of 25-30 stocks, we extracted the ones trading lower than the forward P/E of ~20.0x, as of November 20. Finally, the stocks were ranked in ascending order of their hedge fund sentiments, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Most Undervalued Cybersecurity Stocks to Buy According to Hedge Funds
12) Arqit Quantum Inc. (NASDAQ:ARQQ)
Forward P/E as of November 20: ~18.7x
Number of Hedge Fund Holders: 2
Arqit Quantum Inc. (NASDAQ:ARQQ) is a cybersecurity firm, which uses quantum encryption technology to create and distribute symmetric encryption keys while safeguarding data from cyber threats.
With quantum computers becoming more widespread, Arqit Quantum Inc. (NASDAQ:ARQQ)’s technology for securely creating and distributing encryption keys is expected to revolutionize the industry. Arqit Quantum Inc. (NASDAQ:ARQQ) and SoftIron announced a partnership to enable customers to go for a seamless migration to quantum-safe cloud tasks, with a priority focus on the defense sector.
SoftIron integrated Arqit’s Symmetic Key Agreement Platform (SKA-Platform™) into HyperCloud, which is SoftIron’s ready-to-run true private cloud experience, deployed on-premises or on the battlefield. Wall Street believes that the technology demonstrates a complementary offering and both companies will leverage their existing industry partnerships and defense customers.
As per industry experts, Arqit Quantum Inc. (NASDAQ:ARQQ)’s encryption product remains fully secure against future quantum attacks and does not impact network performance. Amidst the increasing awareness of quantum threats, Arqit Quantum Inc. (NASDAQ:ARQQ)’s strategies in securing new contracts and implementing cost-saving measures should fuel its long-term growth.
Wall Street analysts gave a price target of $51 on the shares of Arqit Quantum Inc. (NASDAQ:ARQQ).
11) Open Text Corporation (NASDAQ:OTEX)
Forward P/E as of November 20: ~7.8x
Number of Hedge Fund Holders: 17
Open Text Corporation (NASDAQ:OTEX) offers intranet, extranet, and corporate portal solutions to organizations. OpenText Cybersecurity provides a range of security solutions, which include prevention, detection, response, investigation, compliance, and recovery.
Wall Street analysts are optimistic about Open Text Corporation (NASDAQ:OTEX)’s strategic partnership with Cork Inc., which will add cyber warranty solutions to offer a holistic solution portfolio tailored specifically for Small and Medium Businesses and Managed Service Providers.
Open Text Corporation (NASDAQ:OTEX)’s MSP/MSSP survey demonstrated that SMBs prioritize comprehensive cybersecurity, with 63% seeking outsourced solutions which include cyber warranty services. The OpenText-Cork partnership should be able to directly address this demand. It provides MSPs the ability to give Cork’s cyber warranty as an add-on service, resulting in developing new revenue opportunities.
Industry experts believe that Open Text Corporation (NASDAQ:OTEX) remains well-placed to achieve strong growth as a result of its purchase of Pillr, an MDR platform, from Novacoast, Inc. This acquisition ramps up Open Text Corporation (NASDAQ:OTEX)’s cybersecurity product roadmap to provide key features such as API integrations and product/pricing bundling for MSPs looking for a comprehensive solution to protect, detect, and respond to cybersecurity threats.
By continuous investment in acquisitions and partnerships, the company remains well-positioned to capitalize on the growing demand for cybersecurity solutions globally. Open Text Corporation (NASDAQ:OTEX)’s acquisition of Zix Corporation offers customers a powerhouse SMB platform for data protection, threat management, email security, and compliance solutions.
Collectively, these initiatives are expected to further strengthen Open Text Corporation (NASDAQ:OTEX)’s position in the cybersecurity market, fueling growth and enhancing its ability.
As per Wall Street, the shares of the company have an average price target of $34.17.