3 Top Cybersecurity Stocks to Snag as Digital Threats Ramp Up
As we delve deeper into the digital age, enterprises and large organizations—both in public and private sectors—are increasingly relying on the Internet for crucial daily operations and commerce. While this digital reliance has fostered innovation, it has also created a breeding ground for cyber risks. Hackers, be they domestic or foreign, are continually on the lookout for vulnerabilities within our digital infrastructures. Recent breaches at American Water Works (AWK) and Comcast (CMCSA) validate this grim reality.
Furthermore, with emerging threats such as artificial intelligence (AI) and deep fakes, the landscape of cyber risk is evolving, demanding heightened vigilance and protection. Against this backdrop of increasing digital threats, the global cybersecurity market shows promising growth trajectory. Forecasts suggest that the cybersecurity market will expand from $193.73 billion in 2024 to $562.72 billion by 2032. These projections may even be conservative, with McKinsey estimating a total addressable market of up to $2 trillion. For savvy investors looking to capitalize on this trend, the question remains: which cybersecurity stocks should be on the radar? Here’s a closer look at three top contenders recommended by analysts at Barclays.
1. Check Point Software (CHKP)
Founded in 1993, Check Point Software stands out as a global leader in cybersecurity solutions, catering to organizations of all sizes. Its broad array of products—including firewalls, threat prevention, cloud security, and endpoint security—equip businesses to fend off cyber threats effectively. Over the past decade, Check Point has exhibited steady revenue growth, with compounded annual growth rates (CAGR) of 5.64% and 2.28% in revenues and earnings, respectively. With the market’s expansion, these rates are expected to increase.
In its latest quarterly results, Check Point exceeded revenue and earnings estimates, reporting a 7% year-over-year growth in revenue to $627 million. Earnings per share (EPS) similarly rose 8% to $2.17, surpassing expectations. Notably, this achievement marked the company’s 15th consecutive earnings beat. Additionally, traditional cash flow from operations climbed to $200 million. The company maintains a healthy cash balance of $3.1 billion.
Newly appointed CEO Nadav Zafrir, an industry veteran, has the potential to catalyze Check Point’s growth trajectory. By broadening its AI offerings, particularly in combating phishing, Check Point is aptly addressing the threats of contemporary cybersecurity. Their innovative products, like the Harmony email solution, have started contributing significantly to revenues. Analysts rate CHKP as a “Moderate Buy,” with a mean target price of $192.92, suggesting a promising upside potential of approximately 17.5% from current levels.
2. CyberArk Software (CYBR)
Established in 1999, CyberArk Software has swiftly become a key player in the privileged access management (PAM) sector, headquartered in Herzliya, Israel. With a market cap of $11.6 billion, the company specializes in safeguarding critical systems from unauthorized access. This expertise has propelled CYBR stock to a remarkable 26.6% increase year-to-date.
In its second-quarter release, CyberArk managed to surpass analyst expectations once again, with revenues ascending by an impressive 28% year-over-year, totaling $224.7 million. Subscription revenues, in particular, soared by 49%. This marks the 16th consecutive earnings beat for the company. With a robust annual recurring revenue (ARR) of $868 million, CyberArk is well-positioned to leverage ongoing demand for PAM solutions, with growth expected to expand at a 21.5% CAGR from 2024 to 2028.
In addition, CyberArk’s acquisition of Venafi is another strategic maneuver aimed at enhancing identity security leadership in the market. Analysts currently rate CYBR stock as a “Strong Buy,” with a mean target price of $310.25, signaling an approximately 11% upside potential.
3. Varonis Systems (VRNS)
Founded in 2003, New York-based Varonis Systems has carved out its niche as a premier data security and analytics provider. This company offers an array of solutions aimed at protecting sensitive data from unauthorized access and insider threats. With a market cap of $6.2 billion, VRNS stock has increased by 20.6% year-to-date.
In its recent quarterly results, Varonis reported a substantial 12.9% growth in revenue to $130.3 million, while its adjusted EPS rose to $0.05. This trend showcases four quarters in a row of earnings beats. Varonis’ ARR stands at $584.2 million, with impressive increases in cash balances and operating cash flow. Partnerships with significant players like Microsoft strengthen Varonis’ marketplace and enhance its credibility in data security.
With analysts rating VRNS stock as a “Moderate Buy,” the mean target price is set at $58.13, marking a potential upside of about 3.6% from current levels.
Ultimately, as the landscape of cyber threats continues to evolve, investing in cybersecurity stocks like Check Point Software, CyberArk Software, and Varonis Systems appears not just prudent, but necessary for growth-oriented investors. Whether you’re playing defense or making bold moves into new markets, these stocks are undeniable players in a sector that’s only going to grow from here.
