The pandemic put the entire world online, digitalizing the economy by years in a matter of months. Cutting-edge cybersecurity systems have never been more essential today with remote working, creating infiltration points for hackers to penetrate. Cyber threats have been a growing concern for years as the coding/hacking expertise around the world make every business a target.
Check Tracy's latest Market Edge Podcast where me and her discuss the cybersecurity space in more detail:
Data breaches seem to be occurring increasingly often in the digital age in which we live. In 2017, one of the three primary US credit agencies, Equifax, was hacked, leaving nearly half of the US and a fourth of the British population exposed.
'Endpoint security' is becoming the central focus of many of these innovation-driven digital security platforms as a proliferating number of devices get connected to the world wide web. Endpoints like laptops, desktops, mobile devices, and internet of things (IoT) devices are the most vulnerable to infiltration. In the mobile new normal, it is vital that businesses stay protected.
According to a survey by PwC, 96% of executives have changed their cybersecurity strategy because of COVID-19, and despite 64% of them expecting revenue declines in 2021, 55% of the executives said they would be increasing their 2021 cybersecurity budget (just 26% decreasing).
CrowdStrike ( CRWD Quick Quote CRWD - Free Report)
CrowdStrike is a modern cloud-based solution for the escalating security threats that the internet age has brought. This company leverages AI, cloud computing, and graph databases for its vigilant security software. CrowdStrike's security AI is perpetually improving as it advances from crowdsourcing and economies of scale. CRWD's cloud-based Falcon platform is an intelligent and evolving digital protector that detects and stops breaches in real-time.
This business was provided with a tremendous tailwind in 2020 as the enterprise's best-in-class AI-driven cybersecurity platform became arguably the most sought-after in the business. Trusted by top banks like Goldman Sachs and Credit Suisse
CRWD was able to produce year-over-year top-line growth figures of more than 80% every quarter since it hit the exchanges last June. The business is swiftly headed towards profitability, with CRWD notching its first robust positive EBITDA in its latest quarterly release and analysts anticipating profitability for the years to come.
CRWD has exploded over the past year, illustrating roughly 300% share price appreciation in the past 52-weeks.
This is my favorite cybersecurity stock on the market today, but its valuation is something of a concern as market euphoria pushes the most exciting stocks beyond their intrinsic value. I am not chasing the seemingly overzealous CRWD rally today with an over 40 times price to forward sales, instead I will be patient.
I believe a reckoning is coming for some of these euphoric, red-inked names and the time to buy is near. I want to see CRWD drop below $200 a share before I consider purchasing.
OKTA is another big player in the cyber security platform that has redefined the security cloud, with identity being the central focus. The Okta Identity Cloud is the start of something brand new to the markets, and this firm is on the ground floor of its market potential.
User authentication is at the core of any enterprise's trust and confidence. Okta enables enterprises to implement a Single Sign-On that is secure for employees and customers alike, allowing them to use any application the business has unlocked for them. It also gives developers the tools to easily implement authentication into their applications.
OKTA has produced over 40% year-over-year top-line growth every quarter since it released its shares to the public in 2017, with COVID not putting a damper on its expansion. Analysts anticipate roughly 30% annual sales growth for the next couple of years, but OKTA has a long history of beating revenue expectations, and I anticipate this to continue.
OKTA is trusted by industry giants from every corner of the market, including FedEx (
FDX Quick Quote FDX - Free Report) , Broadcom ( AVGO Quick Quote AVGO - Free Report) , T-Mobile ( TMUS Quick Quote TMUS - Free Report) , Nasdaq ( NDAQ Quick Quote NDAQ - Free Report) , Booking.com ( BKNG Quick Quote BKNG - Free Report) , and MLB.
Like CRWD, I feel that OKTA's valuation may be a bit stretched with an over 31x price to forward sales. Still, OKTA has pulled back from its $287 high and is sitting right around $255 today. This may be a good long-term opportunity today. For me, I will be waiting for the 'red-inked euphoria bubble' to deflate before I put on a sizable position.
McAfee is a name that you had probably heard in the cybersecurity space before, as it was prominent in the 1900s and 2000s. It is now making its second public appearance after spinning off from Intel. Its fresh October IPO may provide an excellent value play in the cybersecurity sector.
According to the investor relations page, "McAfee is the device-to-cloud cybersecurity company. Inspired by the power of working together, McAfee creates consumer and business solutions that make the world a safer place."
Its consumer security business is growing fast, and there is still plenty of opportunity in its enterprise segment.
MCFE is trading at a reasonable 13 times price to forward earnings, and the stock has been on a tear this past month, driving gains of over 25% since mid-December. This could be a great opportunity to get in on an under the radar stock on the ground floor, with a reasonable valuation and a robust, profitable growth outlay.
The future of cybersecurity is bright as the world goes online and the number of connected devices will continue to proliferate. As data becomes a central focus of business in this digital age, a business must be adequately protected protected. The
new normal is driving a much more mobile economy with an increasing number of vulnerabilities. CRWD, OKTA, and MCFE will all be beneficiaries of the cybersecurity needs of the Roaring 20s and the commencing 4th industrial revolution.
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