People and companies around the world are increasingly exposed to the risks of cyber attacks. Although there is no patent remedy to ward off hackers, governments, companies and private individuals are currently equipping themselves more than ever with cyber security solutions and software, which also benefits cyber security stocks and is the focus of investors. In this article, we present the cybersecurity sector and a selection of cybersecurity stocks in detail.
BACKGROUND AND EMERGENCE OF THE CYBERSECURITY INDUSTRY
The cybersecurity industry has its roots in the early days of the internet. As computers and networks became a central part of business processes, the need to protect these systems became increasingly apparent. From protecting against viruses in the 1980s to defending against complex state-sponsored cyberattacks today, the industry has evolved and diversified rapidly.
IMPORTANCE OF CYBERSECURITY FOR COMPANIES AND PRIVATE INDIVIDUALS
Cyberattacks are omnipresent today. From large companies to private individuals, no one is safe from the threats lurking in the digital world. Data leaks can lead to significant financial losses and cause lasting damage to a company's reputation. For individuals, there is a risk of identity theft, financial loss and privacy breaches. In today's connected world, protection against such threats is of paramount importance.
TRENDS AND GROWTH POTENTIAL IN THE CYBERSECURITY INDUSTRY
Cybersecurity is a growth industry that is undergoing rapid change, driven by various factors.
Internet of Things (IoT) as a growth driver
One of the biggest drivers is the strong growth of Internet of Things (IoT) devices. According to forecasts, the number of IoT devices worldwide will rise to over 50 billion by 2030. From smart thermostats to connected cars, all of these devices collect and transmit data, making them potential targets for attack. Therefore, the security of IoT devices has become a critical area within cybersecurity.
Cloud solutions - opportunity and risk at the same time
Another important trend is the increasing shift of companies to the cloud. While cloud services offer many benefits, such as scalability and cost efficiency, they also lead to new security concerns. Companies need to ensure that their data is secure in the cloud and that compliance standards are met. This requires specialized security solutions and strategies.
Digital transformation
The digital transformation has gained considerable momentum in recent years. Companies from various industries are recognizing the benefits of digital technologies and integrating them into their business processes in order to remain competitive and offer their customers better services. This is not just a simple digitization of existing processes. Rather, digital transformation is enabling completely new business models that create innovative services and products.
However, with the introduction of new digital technologies and platforms, the number of so-called "digital touchpoints" is also increasing. These are interfaces through which customers, employees and business partners interact with a company's digital systems. Each of these touchpoints - whether it's a mobile app, a cloud-based platform or an IoT device - is a potential entry point for cyber criminals.
The expanded attack surface brings new challenges for companies. It is not enough to simply protect a company's main systems. Every endpoint, every device and every software application must be carefully monitored and secured. This is particularly relevant as many companies now use hybrid IT environments that include both on-premise systems (local computers and servers) and cloud-based solutions.
Companies of all sizes - from start-ups to multinational corporations - are aware of the risks associated with digital transformation and are therefore increasingly looking for effective ways to protect their digital assets and their customers' sensitive data. Investing in modern cybersecurity solutions is not only a necessity, but also a crucial factor in gaining and maintaining customer trust.
Skills shortage
Parallel to these developments, a huge labor market for cybersecurity experts is emerging. However, despite the huge demand, there is a significant shortage of qualified professionals in this field. This skills shortage highlights the need for advanced technology and automation solutions to meet the growing security requirements.
OVERVIEW OF THE LARGEST AND BEST-KNOWN CYBERSECURITY STOCKS
In the table below you will find a selection of 10 of the best-known and largest cybersecurity stocks. We then present some of the companies in detail.
Top 10 cybersecurity stocks, sorted by market capitalization
| Company | Symbol | Country | Market capitalization |
| Palo Alto Networks Inc | PANW | USA | 73.69 billion USD |
| Fortinet Inc | FTNT | USA | 44.18 billion USD |
| Crowdstrike Holdings Inc | CRWD | USA | 41.27 billion USD |
| Zscaler Inc | ZS | USA | USD 22.72 billion |
| Akamai Technologies Inc | AKAM | USA | USD 15.48 billion |
| Check Point Software Technologies Ltd | CHKP | Stock exchange: USA / Head office Israel | USD 15.42 billion |
| Okta Inc | OKTA | USA | USD 11 billion |
| Proofpoint Inc | PFPT | USA | USD 10.16 billion |
| CyberArk Software Ltd | CYBR | Stock exchange: USA / Head office Israel | USD 6.53 billion |
| Qualys Inc | QLYS | USA | USD 5.59 billion |
PALO ALTO NETWORKS
- Company: Palo Alto Networks Inc.
- Symbol (TWS): PANW
- ISIN: US6974351057
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 73.69 billion
- Turnover (TTM) in USD: 6.89 billion
Palo Alto Networks is one of the top-selling cyber security companies and is headquartered in Santa Clara, California. The company was founded in 2005 and initially specialized in firewalls - devices that protect data traffic in and out of physical locations such as offices and data centers. While the company's legacy services are still in high demand, its growth today is in the cloud. The company's highly profitable platform has helped it acquire more than a dozen smaller companies specializing in cloud-based solutions in recent years. As a result, Palo Alto Networks has undergone a thorough overhaul of its security division. Management says the acquisition spree is over for now and that it expects double-digit percentage revenue growth in the coming years.
Brief analysis & outlook
Despite the weak overall market development in recent weeks, the Palo Alto Networks share reached a new all-time high in October and is in a stable upward trend. The company's growth is also driven by its active expansion and acquisitions, which shows that it is striving to consolidate its position in the rapidly developing cybersecurity industry. Analysts expect revenue growth to remain robust over the next few years, driven by the expansion of its Next-Generation Security (NGS) services. With the global cybersecurity industry forecast to continue to grow, Palo Alto Networks is expected to remain one of the most important and successful companies in the industry in the coming years.
CROWDSTRIKE
- Company: CrowdStrike Holdings Inc
- Symbol (TWS): CRWD
- ISIN: US22788C1053
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 41.27 billion
- Turnover (TTM) in USD: 2.64 billion
Unlike Palo Alto Networks, CrowdStrike is a purely cloud-based software company that specializes in endpoint security in particular, i.e. protection for devices such as laptops, PCs and servers, as well as all other devices connected to a network. As the company's services are also cloud-based, CrowdStrike is particularly well suited to supporting remote working. CrowdStrike's software uses machine learning to detect security breaches and track down threats. The company has steadily increased the number of modules on its platform to help its customers, and it has entered into new integration agreements with other technology companies to make data protection more consistent across an organization's IT infrastructure.
Brief analysis & outlook
The Crowdstrike share is on an upward trend and has significantly outperformed the broad market in 2023. The share price performance is driven by the recent strong business results. The company reported a year-on-year increase in revenue of 37% and an increase in free cash flow of 44.4% for the second quarter of financial year 2024. In addition, CrowdStrike has increased its revenue guidance and expects revenue for the full fiscal year to be just over $3 billion, an increase of $36%. Crowdstrike is thus demonstrating its ability to grow in a highly competitive market and successfully expand its customer base.
ZSCALER
- Company: Zscaler Inc
- Symbol (TWS): ZS
- ISIN: US98980G1022
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 22.72 billion
- Sales (TTM) in USD: 1.62 billion
Another cloud-based security solutions provider is San Jose, California-based Zscaler. Zscaler has grown its revenue at a rapid pace and is another of the largest pure-play cybersecurity stocks. The company started with a software-as-a-service product for cloud computing protection, but has since added new cybersecurity and end-user monitoring products. End-user monitoring is becoming increasingly important as many people now work from home. In addition, global spending on cloud computing is expected to continue to grow in the coming years, and Zscaler is well positioned to take advantage of this growth.
Brief analysis & outlook
Zscaler is currently in a strong growth phase. The company has distinguished itself in a dynamic and competitive market with its cloud-native security platform and its range of solutions specifically tailored to organizations with remote workers and distributed offices. Especially in the area of Secure Access Service Edge (SASE) and Zero Trust architecture, Zscaler demonstrates innovative approaches that are highly relevant in today's working world.
The forecasts point to continued positive development. With an expected profit growth of 25% next year and a further 26% the year after, Zscaler reflects the high growth potential of the cybersecurity industry. Research and analysis firm Gartner forecasts that global spending on cybersecurity and risk management will increase by $14% to $215 billion by 2024. This underlines the significant market potential that Zscaler could benefit from.
SENTINELONE
- Company: SentinelOne Inc
- Symbol (TWS): S
- ISIN: US81730H1095
- Stock exchange: NYSE
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 4.53 billion
- Turnover (TTM) in USD: 0.52 billion
SentinelOne is a leading cybersecurity provider specializing in endpoint protection. The company offers a comprehensive security platform that includes features such as malware detection and removal, real-time threat intelligence, behavioral analysis, network monitoring and control, and integrated threat prevention. A special feature of SentinelOne is the use of artificial intelligence and machine learning to detect and combat threats in real time.
Brief analysis & outlook
Following its IPO in June 2021, when SentinelOne raised USD 1.2 billion and was valued at USD 10 billion, the company more than doubled its revenue in 2022 and expects a further increase of around 50% in 2023. Despite this rapid expansion, SentinelOne is visibly approaching the break-even point. In the past, the company has exceeded its revenue forecast in 7 out of 7 quarters and profit expectations in 6 out of 7. A particular success for the company was the successful defense against what has been described as the "most successful hacker attack of all time", the SolarWinds hack that compromised many other large companies and government agencies.
AKAMAI
- Company: Akamai Technologies Inc
- Symbol (TWS): AKAM
- ISIN: US00971T1016
- Stock exchange: Nasdaq
- Country: USA
- Currency: US Dollar (USD)
- Market capitalization: USD 15.48 billion
- Turnover (TTM) in USD: 3.66 billion
As a content delivery network, Akamai ensures that data reaches its destination securely. As the amount of data transmitted over the Internet continues to grow, CDNs are becoming increasingly important. A CDN is a network of servers in different locations that are connected via the Internet and deliver content and large amounts of data. Akamai is a leader in this sector and is also developing edge computing technologies that move data away from central data centers and closer to end users.
Brief analysis & outlook
Akamai plays an important role in the field of digital infrastructure and cybersecurity and is therefore the focus of many investors. The need for advanced cybersecurity and reliable cloud infrastructure, reinforced by the growing reliance on digital services, is the foundation for the continued interest in Akamai shares. The recent partnership with Microsoft to improve cybersecurity points to a strong market position and ability to innovate.
In terms of company results, Akamai has seen a rebound after a temporary slowdown, with earnings per share growth of 10 % in the second quarter and a forecast of 21 % EPS growth for 2024. Despite moderate revenue growth of 4 % compared to the same quarter last year, the stock has shown strong performance in the current year.