In this article, we discuss 5 best cybersecurity stocks to buy now. If you want to read a detailed analysis of the cybersecurity market, go directly to 12 Best Cybersecurity Stocks to Buy Now.
5. Cloudflare, Inc. (NYSE:NET)
Market cap as of August 15: $25.568 billion
Cloudflare, Inc. (NYSE:NET) is an American information and communications technology company that primarily focuses on content delivery networks and DDoS mitigation.
On August 5, Cloudflare, Inc. (NYSE:NET)’s revenue surged by 54% on a YoY basis to $234.5 million, outperforming the estimates by $7.1 million. This marked the 8th consecutive quarter for over 50% revenue growth. Since Q2 2021, the dollar-based retention rate of the company has stayed above 120% and for Q2 2022, it was at 126%.
RBC Capital analyst Matthew Hedberg on August 5 maintained an Outperform rating on Cloudflare, Inc. (NYSE:NET) and raised the price target to $74 from $62. The analyst told investors that the company reported another “strong” quarter with no sequential deceleration in revenue growth despite the tough macro environment. He further added the company’s record customer additions and gross renewal rate across all regions.
Here is what Baron Funds had to say about Cloudflare, Inc. (NYSE:NET) in its Q1 2022 investor letter:
“Cloudflare, Inc., another new purchase during the quarter, is a web infrastructure and website security provider. Cloudflare disrupts legacy networking vendors by enabling customers to rent their network solutions in the cloud (and pay for usage) instead of buying firewalls, load balancers and secure web gateway devices. Using a global network in over 100 countries, Cloudflare delivers content and security within 50 milliseconds of 95% of the internet-connected population in the world. Shares contributed 12bps to results on impressive fourth quarter earnings as it continues to successfully layer high-value services such as zero trust, network services, and edge programmability on top of its modern global network. The company is attracting a broader set of investors as Cloudflare now matches durable 50%-plus top-line growth (this was the fifth straight quarter of 50%-plus revenue growth, and 56% current bookings growth suggests strong durability into 2022) with positive operating margins and break-even free cash flow. We believe that Cloudflare will benefit from long-duration of growth disrupting a $100 billion addressable market across application services, network services, and zero-trust services.”
4. Datadog, Inc. (NASDAQ:DDOG)
Market cap as of August 15: $36.771 billion
Datadog, Inc. (NASDAQ:DDOG) is a New York-based system monitoring company that provides a monitoring and analytics platform for developers, IT operations teams, and business users.
Datadog, Inc. (NASDAQ:DDOG) outclassed the Wall Street estimates in its Q2 results after posting an EPS of $0.24, compared to the $0.15 estimates. The revenue of $406.14 million, outperformed the forecasts by $24.86 million and represented a 74% sequential growth. The company’s dollar-based retention rate was above 130% for the quarter. Furthermore, Datadog, Inc. (NASDAQ:DDOG) gross margin increased by 4.5% YoY to 80.8%. The company exited the quarter with cash and cash equivalents of $1.7 billion, $73 million in operating cash flow, and free cash flow for the quarter was recorded at $60.2 million.
Datadog, Inc. (NASDAQ:DDOG) provided the outlook for Q3 2022 and expects non-GAAP earnings in the range of $0.15-$0.17. The company’s revenue expectations are in the range of $410 and $414 million and operating income between $51 million to $55 million.
On August 5, Mizuho analyst Gregg Moskowitz reaffirmed a Buy rating on Datadog, Inc. (NASDAQ:DDOG) shares and lowered the price target to $170 from $175. The analyst noted that the company posted good Q2 results but the management pointed toward a slowdown in user growth among a few large customers.
Here is what Baron Funds had to say about Datadog, Inc. (NASDAQ:DDOG) in its Q1 2022 investor letter:
“Another example is Datadog, the leading infrastructure monitoring, application performance monitoring and log management software platform. Datadog’s stock declined 15% during the quarter, despite reporting sparkling operational results, with revenues accelerating to a growth rate of 84% year-over-year with 33% free cash flow margins, while guiding for 2022 significantly above expectations. Datadog added 4,600 new customers in the quarter, while existing customers continued to increase their spending on Datadog products at a rapid pace with the number of customers using four or more products increasing to 33% from 22% last year. While Datadog’s stock was down, its intrinsic value has undoubtedly increased. This is enabled by rapid innovation (Datadog released 13 new products in 2021) into a market that is benefiting from the secular growth in cloud, digital transformation, and the explosion in complexity as the number of vendors, diversity of technologies and related infrastructure continued to expand.”
3. Fortinet, Inc. (NASDAQ:FTNT)
Market cap as of August 15: $42.643 billion
Fortinet, Inc. (NASDAQ:FTNT) is a multinational corporation that develops and sells cybersecurity solutions. In March 2022, the company announced the termination of its services in Russia, and in the same month, announced the acquisition of network security firm ShieldX.
According to Q2 2022 reports, Fortinet, Inc. (NASDAQ:FTNT) edged ahead of its $0.22 EPS estimates after posting an EPS of $0.24, compared to $0.19 in the previous year. The revenue of $1.03 billion also outperformed the $1.027 billion consensus. The bookings rose to $1.38 billion, representing a 42% YoY growth, and billings increased by 36% to $1.3 billion. Additionally, the non-GAAP gross margins were recorded at 76.5% and non-GAAP operating income made a 25.6% leap to $255.4 million. At the end of the quarter, the company had cash and cash equivalents of $1.73 billion, including short-term investments. During the first half of 2022, the company reported an operating cash flow of $719.5 million. Moreover, Fortinet, Inc. (NASDAQ:FTNT) bought back $800 million worth of shares in the quarter and increased the buyback authorization to $1 billion.
On August 4, Barclays analyst Saket Kalia maintained an Overweight rating on Fortinet, Inc. (NASDAQ:FTNT)’s shares with a price target of $77, down from $80. Kalia noted that the company’s earnings beat and billings flow through was expected. However, the bookings growth was lower than expected.
Here is what ClearBridge Investments had to say about the prospects of Fortinet, Inc. (NASDAQ:FTNT) in its Q3 2021 investor letter:
“Performance among our cohort of IT and Internet companies was mixed, with enterprise software makers thriving while more consumer-oriented stocks faced headwinds. Cyber security software maker Fortinet benefited from a heightened awareness of the need to protect against sophisticated attacks. We are attracted to the recurring revenue nature of these software companies that are increasingly delivering their products on a subscription basis through the cloud. Software business models also tend to avoid many of the inflationary issues facing companies with a physical product or service.”
2. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Market cap as of August 15: $46.837 billion
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a Texas-based cyber security company. In Q1 2022, 80 hedge funds held bullish positions in the company compared to 74 in the previous quarter. Tiger Global Management held the most prominent stake in the company, valued at $2 billion after a 17% increase in holdings from Q4 2021.
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is one of the few companies that haven’t been affected by the pandemic. The company had a 64% YoY revenue growth in its last quarter and showed a 69% growth at the end of FY2022. In FQ1 FY2023, the company turned over dollar-based retention rates above 120% for the 16th consecutive quarter. The company will announce its FQ2 FY2023 results on August 30 and expects $516.8 million in revenues and $2.2 billion in revenues for FY2023.
On August 11. Guggenheim analyst John DiFucci initiated CrowdStrike Holdings, Inc. (NASDAQ:CRWD)’s coverage with a Buy rating and a $270 price target. The analyst believes that the company will be able to meet its short and mid-term targets even if the recession is prolonged.
Here is what ClearBridge Investments had to say about CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q2 2022 investor letter:
“The severity of the current selloff, exacerbated by extreme negative investor sentiment, especially toward growth stocks, has compressed the multiples of a number of portfolio companies despite strong fundamentals and led us to add to several existing positions. One example is cybersecurity software provider, CrowdStrike (NASDAQ:CRWD), which continues to execute well against a robust demand environment for its endpoint security solutions with quarterly results and forward guidance outperforming expectations.”
1. Broadcom Inc. (NASDAQ:AVGO)
Market cap as of August 15: $226.367 billion
Broadcom Inc. (NASDAQ:AVGO) is an American company primarily focusing on semiconductor technology. Moreover, the company’s Symantec® Enterprise Cloud is a cybersecurity solution that provides data-centric hybrid security solutions to large enterprises.
Broadcom Inc. (NASDAQ:AVGO) has an 11-year history of consecutive dividend returns and an 82% dividend safety score. Furthermore, it has an average recession dividend cut risk of 0.5% and a severe recession dividend cut risk of 1.8%. As of August 15, the company has a dividend yield of 2.94% with an annualized dividend payout of $16.40. The latest quarterly dividend of $4.10 was paid out on June 30 to the shareholders of record on June 22.
On July 20, Deutsche Bank analyst Ross Seymore maintained a Buy rating on Broadcom Inc. (NASDAQ:AVGO)’s shares and lowered the price to $635 from $700.
Here is what ClearBridge Investments had to say about Broadcom Inc. (NASDAQ:AVGO) in its Q4 2021 investor letter:
“However, ClearBridge portfolio companies are responding by supporting their workforces and showing resilience in adapting and thriving. Semiconductor companies ClearBridge owns and engages with have been successful in advancing vaccinations in their global supply chains. In Malaysia, for example, Broadcom has taken part in PIKAS, a public-private partnership vaccination program focusing on the workforce in critical manufacturing sectors. By the summer of 2021, Broadcom was able to get over 90% of workers in its Penang factory at least one dose of vaccine, and roughly 73% fully vaccinated. Companies in the program also pay the administration cost for vaccinations including cases where the employee is no longer employed by the company before full immunization of the employee.”
You can also take a look at 10 Stocks To Buy According to William Von Mueffling’s Cantillon Capital Management and 10 Important Energy Stocks Making Moves After Earnings.
