4 Best CyberSecurity Stocks for 2021
December 14, 2020 at 08:02 AM EST
As communities globally have embraced a digital way of communications, shopping, and entertainment, thanks to a global pandemic, the security and safety of data transactions have become much more important. With this, cybersecurity companies have been benefiting immensely as organizations increasingly adopt cloud computing and more stringent data controls. Four such companies are Okta (OKTA), Palo Alto Networks (PANW), CLOUDFLARE (NET), and Zscaler (ZS). Their stocks have rallied significantly this year and should continue moving higher next year based on their contribution to meeting the growing and changing demand for security in cyber communications.
The world is now eagerly gearing up for a COVID-19 vaccine in 2021. However, the rising number of new cases of infection is alarming and implies that remote working and social distancing will continue to be the norm for some time. As such, we believe the demand for data security, safe access and privacy will continue to increase.
This year, remote working, online education, and other forms of digital transactions saw a rapid surge for which many organizations were not prepared. However, in 2021, companies will ensure that they have the infrastructure in place to protect their intellectual property, minimize data breaches and offer secure transactions. Hence, the cybersecurity space should get a lot more attention. Experts suggest that companies will move away from the LAN era to Secure Access Service Edge (SASE) architecture.
According to Gartner, at least 40% of enterprises will adopt well-defined strategies to take to advantage of SASE. Besides, the zero-trust network access technology (ZTNA) trend is likely to see increased momentum going forward.
Cybersecurity software companies will likely continue to witness an expansion in business and their stocks will soar. Okta, Inc. (OKTA), Palo Alto Networks, Inc. (PANW), CLOUDFLARE, INC. (NET), and Zscaler, Inc. (ZS) are four cybersecurity stocks that have been on fire in 2020 and we think will continue their momentum going into 2021.
Okta, Inc. - (OKTA)
Okta offers identity management services for businesses across the United States and globally. The company offers these services through its platform, Okta Identity Cloud, which includes facilities like Universal Directory and a Single Sign-On. OKTA also offers a unique Adaptive Multi-Factor Authentication with extra security for cloud, mobile, and Web applications.
OKTA is expanding its footprint in the financial services segment. It has announced new partnerships with Finance of America, Canadian Western Bank, First National of Nebraska, and with the M&T Bank-powered digital bank, Nota. In another development, Okta Identity Cloud is also available on AWS Marketplace for better availability to enterprises.
During the third quarter ended October 31, OKTA’s revenue surged 42% year-over-year to$217.4 million. The company’s subscription revenue increased 43%. Its total calculated billing for the quarter rose 46% year-over-year to $1.58 billion, and its loss per share expanded to $0.56 from a loss of $0.53 posted in the same period last year.
The street expects revenue for the quarter ending January 2021 to be $221.8 million, indicating a 32.5% growth year-over-year. EPS is likely to climb at the rate of 25% per annum over the next five years. OKTA also expects revenue for the fourth quarter to be in the range of $221 million to $222 million.
On a year-to-date-basis, OKTA surged 118.7% to end Friday’s trading session at $252.35, quite close to its 52-week high at $252.99. Over the past six months, the stock has climbed 41.1%.
How does OKTA stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #3of 48 stocks in the Software - Business industry.
Palo Alto Networks, Inc. (PANW)
PANW is a leading cybersecurity solutions provider globally. It leverages disruptive technologies like AI, automation, and analytics to find solutions to the most complex security challenges. The company also offers some of the most high-end firewall products and services to counter hacks and data theft. Besides fixed networks, PANW extends to mobile devices and the cloud.
Palo Alto Networks has announced that it is rolling out new 5G security capabilities for enterprises to ensure granular network visibility, end-to-end protection, and control across all 5G network layers. The company said that these capabilities are available on the Palo Alto Networks PA-5200 Series and PA-7000 Series hardware firewalls as well as on all VM-Series software models running PAN-OS 10.0 or greater.
PANW’s revenue for the first quarter has climbed 23% year-over-year to $ 946 million. Compared to the prior year period, billings for the quarter grew 21% to $1.1 billion, while deferred revenue increased 31% to $3.9 billion. The company’s EPS for the quarter rose to $1.62 from $1.05 posted in the same period last year.
Analysts expect revenue for the quarter ending April 2021 to be $1 billion, representing 25.6% year-over-year growth. Meanwhile, EPS is likely to grow 20.2% to $1.43.
PANW ended Friday’s trading session at $309.93, gaining 34% year-to-date. During the last six months, the stock rallied 39.7%.
It is no surprise that PANW has a “Strong Buy” in our POWR Ratings system with a grade of “A” in Trade Grade, Buy & Hold Grade, and Peer Grade, and a “B” in Industry Rank. In the 23-stock Software - Security industry, PANW is ranked #1.
CLOUDFLARE, INC. (NET)
NET is a global leader in cybersecurity offering unique software to enable the laptops, mobile, and tablets to function securely. The company offers DDoS mitigation, secure internet domains, as well as content-delivery-network services. NET’s cloud network spans 200 cities in more than 100 countries. The company’s clientele includes MARS, L’Oreal, Doordash, IBM, Garmin, and Thomson Reuters.
NET has developed a new Domain Name System (DNS) standard, called Oblivious DNS over HTTPS (ODoH), in association with Apple and cloud service provider Fastly. This new protocol is designed to anonymize web browsing and deliver better Internet privacy to end users. Equinix, PCCW, and SURF are the proxy servers that NET has partnered with.
During the third quarter ended September 30, 2020, NET’s revenue climbed 55% year-over-year to $114.2 million. The company’s loss per share narrowed to $0.09 from $0.35 in the same period last year. During the quarter, NET added a record of nearly 100 large enterprise customers in addition to its first $10 million ARR customer.
The consensus revenue estimate for the fourth quarter ending December 31, 2020 will be $118.3 million, indicating a 40.9% rise year-over-year. Meanwhile, EPS is expected to grow 30.1% for 2021. NET expects its fourth quarter revenue to be in the range of $117.5 to $118.5 million.
NET rallied 383.1% on a year-to-date basis, to close at $82.41 on Friday. The stock has soared 189.2% over the past six months
NET’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Peer Grade and Buy & Hold Grade. It has a “B” for Industry Rank. It is ranked #2 of 23 stocks in the Software - Security industry.
Zscaler, Inc. (ZS)
ZS offers a secure workforce, app security, as well as safe customer access, thus enabling its clients to work remotely without fear of a lack of data security. Household and personal care, apparel, diversified insurance, retail & food, beverages are some of the industries serviced by ZS. The company’s customer base includes names such as Siemens, GE, FCC, and ABInBev. ZS operates on an expansive scale and handles 120 billion transactions daily across 185 countries.
On December 8, announced Zscaler Cloud Protection, which is a comprehensive portfolio that simplifies and automates protection for workloads within any cloud platform. The new offering is aimed at minimizing attack options and automating globally enforced security policies across multi-cloud footprint of organizations.
During the first quarter ended October 31, ZS’s revenue surged 52% year-over-year to $142.6 million. The company’s calculated billings grew 64% year-over-year to $144.7 million, while deferred revenue climbed 51% over the year to $371.9 million. ZS’s loss per share for the quarter expanded to $0.41 from $0.13 posted in the same period last year.
The street expects revenue for 2021 to climb 41.8% year-over-year to $611.7 million. Meanwhile, EPS is likely to climb at the rate of 40.6% per annum over the next five years.
On a year-to-date basis, ZS surged 291.2% to end Friday’s trading session at $181.91. During the past six months, the stock has climbed 77.2%.
ZS’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade, Buy & Hold Grade and a “B” for Peer Grade and Industry Rank. It is ranked #3 of 23 stocks in the Software - Security industry.
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OKTA shares were trading at $254.90 per share on Monday afternoon, up $2.55 (+1.01%). Year-to-date, OKTA has gained 120.94%, versus a 15.64% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.4 Best CyberSecurity Stocks for 2021 appeared first on StockNews.com