These 3 "Under the Radar" Cybersecurity Stocks Could EXPLODE in 2024

The relentless rise of cybercrime continues to be a major concern for businesses worldwide. Just in 2023, ransomware attacks inflicted an estimated $20 billion in damages across the globe [source: Cybersecurity & Infrastructure Security Agency (CISA)]. These attacks, like the one that crippled MGM Resorts International, can cause significant financial losses, operational disruptions, and reputational damage. Fortunately, the cybersecurity industry is on the front lines of defense, offering investors opportunities to profit while backing companies that protect our digital infrastructure.

This newsletter explores three compelling cybersecurity stocks poised for growth: Fortinet (FTNT), Palo Alto Networks (PANW), and Check Point Software Technologies (CHKP).

Why Cybersecurity Stocks Are a Smart Bet

The cybersecurity market is experiencing explosive growth. According to Grand View Research, the global cybersecurity market is expected to reach a staggering $323.1 billion by 2028, reflecting a compound annual growth rate (CAGR) of 13.4%. This surge is fueled by several key factors:

• Exponential Growth in Connected Devices: The Internet of Things (IoT) is rapidly expanding, with billions of new devices connecting to the internet every year. This vast and ever-growing network creates a larger attack surface for cybercriminals to exploit.

• Rising Costs of Data Breaches: The average cost of a data breach in 2023 reached a record high of $4.35 million [source: IBM Security], highlighting the significant financial burden cyberattacks pose on organizations.

• Regulatory Push: Governments around the world are enacting stricter data privacy regulations, such as GDPR and CCPA, mandating companies to invest in robust cybersecurity measures. This compliance requirement creates a steady stream of revenue for cybersecurity firms.

Beyond Ransomware: The Evolving Threat Landscape

While ransomware attacks continue to grab headlines, the cybersecurity threat landscape is constantly evolving. Here's a glimpse into some of the emerging threats organizations are facing:

• Supply Chain Attacks: Hackers are increasingly targeting third-party vendors and suppliers to gain access to a company's critical systems. The SolarWinds supply chain attack of 2020 serves as a stark reminder of the vulnerabilities within interconnected ecosystems.

• Cloud Security Concerns: As businesses migrate more data and applications to the cloud, securing these environments becomes paramount. Cloud misconfigurations and vulnerabilities can leave sensitive data exposed to cybercriminals.

• The Rise of Deepfakes and Disinformation: Deepfakes, which are manipulated videos or audio recordings, can be used to spread misinformation and sow discord. This emerging technology poses a threat to national security and democratic processes.

Top 3 Cybersecurity Stocks to Watch

1. Fortinet (FTNT):

A leader in broad, integrated, and automated cybersecurity solutions, Fortinet boasts a strong track record of innovation. Their FortiGate firewalls are the number one deployed security appliance globally, according to Gartner, protecting millions of organizations from cyber threats [source: Gartner]. Their Security Fabric platform offers comprehensive protection across the entire digital attack surface, from endpoints to the cloud. With a healthy balance sheet and a focus on recurring revenue streams, Fortinet is well-positioned to capitalize on the booming cybersecurity market. Fortinet's revenue grew 18% year-over-year in FY2023, and analysts expect this momentum to continue, with an average price target of $82.50 representing a potential upside of 38% [source: Yahoo Finance].

2. Palo Alto Networks (PANW):

Palo Alto Networks has transitioned from a firewall company to a comprehensive cybersecurity powerhouse. Their platformization efforts consolidate various security functions into a single offering, simplifying security management for businesses. This approach is resonating with customers, as evidenced by Palo Alto Networks' leadership position in over 21 cybersecurity categories according to Gartner. Furthermore, Palo Alto Networks consistently ranks as a leader in Gartner's Magic Quadrants for various cybersecurity categories, a testament to the effectiveness of their solutions. With a strong brand reputation and a loyal customer base, PANW stock is a solid investment choice. Palo Alto Networks' revenue grew 19% year-over-year in FY2023, and analysts are bullish on the stock, with an average price target of $398 representing a potential upside of 30% [source: Yahoo Finance].

3. Check Point Software Technologies (CHKP):

Check Point is a veteran cybersecurity provider with a proven track record of success. Their SandBlast Zero Trust Network Access solution offers advanced threat prevention capabilities, shielding organizations from sophisticated cyberattacks. This focus on zero trust security aligns perfectly with the evolving threat landscape where traditional perimeter defenses are no longer enough. Additionally, Check Point's focus on cloud security aligns perfectly with the increasing adoption of cloud-based applications. Their Harmony Cloud platform provides comprehensive protection for cloud workloads and data. With a strong product portfolio and a global presence, CHKP stock presents a compelling opportunity for investors seeking exposure to the cybersecurity sector. Check Point's revenue grew 7% year-over-year in FY2023, and while this growth rate is slightly lower than its peers, the company boasts a healthy profit margin and strong free cash flow generation. Analysts expect this stability to continue, with an average price target of $165 representing a potential upside of 22% [source: Yahoo Finance].

Investing in Cybersecurity: A Strategic Move

Investing in cybersecurity stocks is a strategic way to hedge against the rising tide of cybercrime. The industry is poised for continued growth, driven by the factors mentioned above. FTNT, PANW, and CHKP are all industry leaders with a proven track record of innovation and execution. They offer a variety of security solutions that cater to the evolving needs of organizations.

Here are some additional factors to consider before investing in cybersecurity stocks:

• Company Focus: Evaluate a company's core competencies and its alignment with the most pressing cybersecurity threats.

• Financial Performance: Analyze the company's revenue growth, profitability, and cash flow generation.

• Valuation: Compare the stock price to industry benchmarks and consider the company's future growth prospects.

Remember, investing always carries risk. Conduct your own research and consult with a financial advisor before making any investment decisions.

Stay Informed on Cybersecurity Trends

The cybersecurity landscape is constantly evolving. Here are some resources to help you stay informed on the latest threats and trends:

• CISA Cybersecurity Resources: https://www.cisa.gov/

• ENISA Threat Landscape Reports: https://www.enisa.europa.eu/topics/cyber-threats/threats-and-trends

• Gartner Security Blog: https://www.gartner.com/en/conferences/na/security-risk-management-us

By understanding the cybersecurity threat landscape and the role these companies play in defense, you can make informed investment decisions and potentially profit from the ever-growing cybersecurity market.

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