Q4 Stock Predictions: 3 Cybersecurity Stocks Ready to Blast Off

Stocks to buy

The online world makes it easier for us to connect with people, buy products, and consume content. Anyone can enter this digital space with a computer, tablet, or smartphone. While many people touted the benefits of this level of connectivity during the internet’s early days, the disadvantages and risks have been gaining more attention. This has led to the rise of cybersecurity stocks to buy.

One of those risks is the increased vulnerability of information. Cybercriminals have gotten better at infiltrating companies and accessing sensitive data. While data breaches have been prevalent for decades, an unchecked hacker can hurt a company’s revenue and even take it out of business.

MGM (NYSE:MGM) and Caesars (NASDAQ:CZR) both became victims of high-profile cyber attacks that exposed the data of thousands of customers. Both companies face a combined nine lawsuits. Those legal expenses could decimate small businesses.

MGM warned investors the cyber attack could have a material impact on the company, and Moody’s issued a similar warning about the entertainment giant. Video slot machines went dark, customers couldn’t get into their hotel rooms, and incoming travelers canceled their trips in light of the news.

Cybersecurity companies minimize the likelihood of getting into this situation in the first place. These same companies have mitigation efforts in place to minimize the damage if a hacker slips through the system. Investors have been riding high with cybersecurity stocks for several years, and the continued importance of cybersecurity suggests these three stocks will soar.

Fortinet (FTNT)

An image of a hacker on a laptop with icons of messages and data behind him

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Fortinet (NASDAQ:FTNT) shares have marched higher in 2023 and have rewarded long-term shareholders. The stock has more than tripled over the past five years and is up by 20% year-to-date.

Fortinet briefly touched $80/share in the summer before falling to $58/share due to reduced guidance. The guidance reductions were minimal and still suggest the company is growing revenue and earnings at a healthy pace.

The drop has presented a buying opportunity and lowered the company’s forward P/E ratio to 33. The cybersecurity company regularly has profit margins above 20% with strong growth. In the third quarter, Fortinet reported 26% year-over-year revenue growth. The company also achieved $438.3 million in free cash flow during this quarter. Net income came in at $266.3 million which represents a 53% year-over-year increase.

Fortinet has over 680,000 customers and offers a suite of over 50 enterprise cybersecurity products. The company’s customer base, innovative technology, and financially sound business model make it a compelling investment heading into 2024.

Crowdstrike (CRWD)

Mobile phone with website of American software company CrowdStrike Holdings (CRWD) Inc. on screen in front of website. Focus on top-center of phone display. Unmodified photo.

Source: T. Schneider / Shutterstock.com

Crowdstrike (NASDAQ:CRWD) hasn’t gained as much as Fortinet over the past five years, but the company’s year-to-date has remained largely uninterrupted. CRWD shares have gained over 60% year-to-date.

Crowdstrike recently reported back-to-back profitable quarters which can strengthen the company’s valuation in the future. In the second fiscal quarter of 2024, Crowdstrike reported $8.5 million in GAAP net income attributable to the business. This figure was $0.5 million in the prior quarter. During the same period last year, Crowdstrike reported a $49.3 million GAAP net loss attributable to the business.

Total revenue growth still held firm with a 37% year-over-year improvement. More than a third of the company’s total revenue is recurring. Annual recurring revenue currently stands at $2.93 billion.

Many corporations rely on the Crowdstrike Falcon platform to detect threats and stop breaches. The company is an established leader within the industry, and a sudden growth in profits can help the stock reach new highs. Crowdstrike currently trades at a 47-forward P/E ratio. If the company continues to surprise with high net income growth, that ratio can get to a reasonable level much sooner.

Palo Alto Networks (PANW)

An image of a circle web with a lock icon in the center. AI stocks

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Palo Alto Networks (NASDAQ:PANW) has comfortably outperformed major indices with a 70% year-to-date gain. Shares have more than tripled over the past five years.

The cybersecurity company reported an excellent 26% year-over-year revenue growth in the fiscal fourth quarter. The company’s net income growth has contributed to a 44-forward P/E ratio.

Palo Alto Networks’ guidance indices $1.82 to $1.85 billion in revenue to start fiscal year 2024. That puts year-over-year growth between 17% and 19%. The company anticipates revenue acceleration later in the year. Guidance for year-over-year revenue growth from fiscal year 2023 to fiscal year 2024 came in at 18%-19%.

Palo Alto Networks works with thousands of customers across all sectors. The company offers industry-leading threat intelligence that keeps businesses safer from cyber attacks. Investors have been rewarded nicely for holding on to shares, and more gains seem to be on the way for long-term investors.

On this date of publication, Marc Guberti held a long position in FTNT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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