In this article, we talk about the 5 cybersecurity stocks to buy as US-China tensions mount. If you wish to read our detailed analysis of US-China tensions and cybersecurity stocks, go directly to 10 Cybersecurity Stocks to Buy as US-China Tensions Mount.
5. Zscaler, Inc. (NASDAQ:ZS)
Number of Hedge Fund Holders: 39
Zscaler, Inc. (NASDAQ:ZS) is up next on our list of cybersecurity stocks to buy as US-China tensions mount. It is a cybersecurity firm which provides a cloud-based internet security platform called Zscaler Zero Trust Exchange.
At the end of May, Cowen analyst Shaul Eyal gave Zscaler, Inc. (NASDAQ:ZS) an ‘Outperform’ rating after the company beat Q3 estimates and raised 2022 guidance. The analyst pointed out that within a threatening cyber environment, awareness for the firm’s Zero Trust platform is growing, and its solid execution is powering deal expansion, top-line growth, and pipeline momentum. On July 22, Citi analyst Fatima Boolani lowered the firm’s price target on Zscaler, Inc. (NASDAQ:ZS) to $200 from $225 and maintained a ‘Buy’ rating on the company shares.
At the end of the first quarter of 2022, 39 hedge funds disclosed ownership of positions in Zscaler, Inc. (NASDAQ:ZS), up from 31 hedge funds a quarter earlier. D E Shaw, with a nearly $313 million stake, was the largest shareholder of the cybersecurity firm in Q1 2022.
4. Cloudflare, Inc. (NYSE:NET)
Number of Hedge Fund Holders: 44
Then there’s Cloudflare, Inc. (NYSE:NET), a provider of integrated cloud-based security solutions around the globe. In May, the company announced that it had joined the European Union’s Cloud Code of Conduct General Assembly, and received two new cloud security certifications as well. Under this agreement, Cloudflare, Inc. (NYSE:NET) will help companies adopt cloud services in compliance with the European Union’s regulations on data protection and privacy.
44 hedge funds were long Cloudflare, Inc. (NYSE:NET) shares at the end of the first quarter, with collective stakes worth $1.24 billion. Its largest shareholder was D E Shaw, with 1.53 million shares worth roughly $184 million.
On June 28, Evercore ISI analyst Amit Daryanani lowered the firm’s price target on Cloudflare, Inc. (NYSE:NET) to $65 from $110, and kept an Outperform rating on the company shares. The analyst lowered the price target owing to the current uncertainty in the macro environment.
Baron Funds, an asset management firm, talked about the market position and prospects of Cloudflare, Inc. (NYSE:NET) in its Q1 2022 investor letter. Here’s what was said:
“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.”
3. Okta, Inc. (NASDAQ:OKTA)
Number of Hedge Fund Holders: 46
Okta, Inc. (NASDAQ:OKTA) is a cloud-based cybersecurity company which specializes in identity access management. Its main platform is the Okta Identity Cloud, which offers businesses, government agencies and other entities a range of identity solutions.
On July 19, Bernstein analyst Peter Weed initiated coverage of Okta, Inc. (NASDAQ:OKTA) with a ‘Market Perform’ rating and a $94 price target. The analyst noted that the company is an “exciting” near 40% organic growth story since before Covid, through the pandemic and in 2022 as well. He noted that this growth does not account for the rapid growth generated by Okta’s acquisition of Auth0.
A detailed review of the 900+ hedge funds tracked by Insider Monkey showed that 46 hedge funds were bullish on Okta, Inc. (NASDAQ:OKTA) at the end of the first quarter, in comparison to 52 hedge funds a quarter earlier. With a stake consisting of 1.78 million shares worth nearly $270 million, SCGE Management was the biggest Q1 shareholder of Okta, Inc. (NASDAQ:OKTA).
Here is what investment firm Lakehouse Capital had to say about Okta, Inc. (NASDAQ:OKTA) in its Q2 2021 investor letter:
“The Fund held 20 positions as of the end of June and exited four during the year (including) Okta. The companies we exited were sold almost entirely on the basis of their valuations getting stretched well past their norms and to levels where the return profile no longer offered the asymmetric upside that led us to invest in the first place. We dislike selling on valuation as great growth companies are hard to find and letting winners run is an important facet of a winning growth strategy, however, we’re not gluttons for punishment either and in each of those cases we redeployed capital towards other high-quality growth companies with less demanding valuations.”
2. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 80
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a Texas-based company which offers managed security services, IT operations management, threat intelligence and hunting, Zero Trust identity protection, and log management.
With combined positions worth $5.55 billion, 80 hedge funds were long CrowdStrike Holdings, Inc. (NASDAQ:CRWD) at the end of the first quarter of 2022. This shows a positive trend from the previous quarter where 74 hedge funds held $5.23 billion worth of stakes in the cybersecurity firm. Tiger Global Management LLC was the largest Q1 shareholder of the firm, with a massive $2 billion stake.
On June 6, Morgan Stanley analyst Hamza Fodderwala upgraded CrowdStrike Holdings, Inc. (NASDAQ:CRWD) to ‘Overweight’ from ‘Equal Weight’ with a price target of $215, up from $195. He noted that the recent pullback offers an attractive entry point, and that the stock offers “defensive positioning” in an uncertain macro environment. Fodderwala noted that security demand remains durable as companies increase cybersecurity spending in a rising threat environment. According to the analyst, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leading beneficiary of growing secular trends within the cybersecurity industry.
“CrowdStrike (NASDAQ:CRWD), a security software platform designed to protect information technology assets and cloud workloads, delivered strong earnings results with solid recurring revenue, customer growth, and profitability. We expect strong demand to continue, largely in part due to the elevated cyber security threat environment as Russia may seek to attack governments and enterprises in retaliation for economic sanctions imposed in response to its attack on Ukraine.”
1. Palo Alto Networks, Inc. (NYSE:PANW)
Number of Hedge Fund Holders: 87
California-based network security provider Palo Alto Networks, Inc. (NYSE:PANW) has posted gains of 28.12% in the last 12 months as of July 25, highlighting its status as a leading cybersecurity company which stands to benefit in the current geopolitical environment.
Morgan Stanley analyst Hamza Fodderwala on June 30 kept an ‘Overweight’ rating on Palo Alto Networks, Inc. (NYSE:PANW) shares and reiterated the stock as a top pick, along with a $823 price target. He noted that the company shares are “materially mispriced” considering its 30% free cash flow growth and increasing stock buybacks.
87 hedge funds out of the 900+ tracked by Insider Monkey reported bullish bets on Palo Alto Networks, Inc. (NYSE:PANW) at the end of Q1 2022, with an aggregate worth of $3.9 billion. This shows vastly improving investor confidence in the company over the previous quarter where 73 hedge funds held PANW shares. Arrowstreet Capital, with a position worth more than $471 million, stood as the biggest shareholder of Palo Alto Networks, Inc. (NYSE:PANW) in the first quarter of 2022.
Here is what ClearBridge Investments had to say about Palo Alto Networks, Inc. (NYSE:PANW) in its Q1 2022 investor letter:
“The portfolio also saw solid performance from cybersecurity names Palo Alto Networks (NYSE:PANW) which is gaining prominence as the risk of global cyberattacks increases as part of the Russian offensive. On an individual stock basis, leading contributors to absolute returns in the first quarter included positions in Palo Alto Networks.”
You can also take a look at 10 Best Stocks Under $10 to Buy Right Now and 15 Best Security Stocks to Buy Now.
