Forget Fortinet, buy these 3 cybersecurity stocks instead
Shares of popular cybersecurity solutions provider Fortinet, Inc. (FTNT) have risen significantly over the past year, driven by investor optimism about the growth prospects of the cybersecurity industry in the digital age. . However, the company’s relatively low profitability relative to its peers and overvalued stock prices make it vulnerable to a downturn. FTNT’s EV / Forward sales of 12.40x is 190.9% above the industry average 4.26x In addition, the company’s 10.9% leveraged free cash flow margin is 63.9% lower than the industry average of 30.1%. Wall Street analysts expect FTNT to see an 11.3% drop in the near term. Therefore, we believe it is better to avoid FTNT now.
However, with the adoption of hybrid work models and large-scale digitization, the demand for cybersecurity solutions is growing rapidly. Indeed, the global cybersecurity market size is expected to grow at a CAGR of 12.5% ââto reach $ 418.30 billion by 2028.
Against this backdrop, we believe it is wise to invest in fundamentally strong cybersecurity stocks, NortonLifeLock Inc. (NLOK), Check Point Software Technologies Ltd. (CHKP) and Radware Ltd. (RDWR). They are well positioned to perform much better than FTNT in the short term.
NortonLifeLock Inc. (NLOK)
NLOK in Mountain View, Calif., Is a software company that provides cybersecurity solutions to consumers around the world. The company’s products and services help users protect their devices, online privacy, identity, and home networks. NLOK sells its related products and services through retailers, telecommunications service providers, computer hardware manufacturers and e-commerce platforms.
On June 29, 2021, NLOK unveiled its Norton Utilities Ultimate, a new performance PC product designed to address the challenges of sluggish performance, response time, and internet speed caused when gaming, browsing, and browsing. streaming content to Windows PCs. Norton Utilities Ultimate helps improve PC performance while recovering lost files and protecting sensitive information. NLOK expects to expand its reach in the market with the product in the near term.
On June 2, NLOK launched Norton Crypto, a new feature that allows consumers to easily and securely mine cryptocurrencies through its trusted Norton 360 platform. As the crypto economy continues to gain momentum In popularity, Norton Crypto provides consumers with a safe and reliable way to mine Ethereum without exposing themselves and their devices to the pitfalls of disabling security. NLOK expects to generate strong demand from coin miners in the near term.
NLOK’s net revenue for its fiscal fourth quarter, ended April 2, 2021, increased 9.4% year-over-year to $ 672 million. The company’s gross profit was reported at $ 573 million, up 10.8% from the prior year period. Its non-GAAP operating income was $ 342 million, a 34.1% year-over-year improvement. While its non-GAAP net income increased 40.1% year-on-year to $ 234 million, its non-GAAP EPS increased 53.8% year-on-year to $ 0.40. The company had $ 933 million in cash and cash equivalents as of April 2, 2021.
A consensus EPS estimate of $ 0.42 for the current quarter, ending September 30, 2021, represents a 16.2% year-over-year improvement. NLOK has beaten consensus EPS estimates in each of the past four quarters. The consensus estimate of revenue of $ 690.23 million for the current quarter represents a gain of 10.2% over the previous year period. Analysts expect the stock’s EPS to grow at a rate of 14.8% per year over the next five years. The stock has gained 26.3% in the past three months and closed yesterday’s trading session at $ 27.73.
NLOK’s POWR ratings reflect this promising outlook. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
The stock has an A rating for quality and a B rating for value and growth. Click here to see the additional ratings for NLOK (Stability, Feeling, and Momentum).
NLOK is ranked n Â° 1 out of 24 stocks in the Software – Security sector.
Click here to view our Software Industry Report for 2021
Check Point Software Technologies Ltd. (CHKP)
Based in Israel, CHKP develops, markets and supports a range of software and hardware products and services for IT security around the world. The company offers a portfolio of network security, data and endpoint security and management solutions, and sells them to consumers, service providers and small and medium-sized businesses through distributors, system integrators , original equipment manufacturers and managed security service providers. .
In early July, CHKP became a sponsor of The Smart Factory @ Wichita, a new Industry 4.0 immersive experience center from Deloitte. Due to the overwhelming need for a comprehensive cybersecurity architecture to protect smart factories from ransomware attacks and hackers, CHKP and Deloitte will work to advance smart factory execution and enable manufacturers to adopt Industry 4.0 technologies that improve quality, productivity and sustainability, in a digitally secure manner.
On June 15, CHKP extended the capabilities of its unified cloud native security platform to deliver application-centric workload protection with Check Point CloudGuard Workload Protection. This unified, automated approach reduces the complexity and risk of securing cloud applications and workloads, with end-to-end protection for all applications and microservices on a single, cloud-native platform. CHKP should see good sales from this solution in the near term.
For its fiscal first quarter, ended March 31, 2021, CHKP’s total revenue increased 4.3% year-over-year to $ 507.60 million. The company’s non-GAAP operating income was $ 246.30 million, up 6.5% from the prior year period. Its non-GAAP net income was reported at $ 211.20 million, representing a 2.6% year-over-year improvement. CHKP’s non-GAAP EPS increased 8.5% year-on-year to $ 1.54. As of March 31, 2021, the Company had $ 561.90 million in cash and cash equivalents.
CHKP has beaten Street’s EPS estimates in each of the past four quarters. Its revenue is estimated at $ 67.12 million for the current quarter, ending September 30, 2021, an increase of 7.3% year-over-year. CHKP’s EPS is expected to grow at a rate of 5% per year over the next five years. The stock has gained 4.3% over the past year and closed yesterday’s trading session at $ 116.34.
CHKP’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system.
The stock has an A rating for quality and a B rating for value. We also rated CHKP for stability, growth, sentiment and momentum. Click here to access all CHKP assessments.
CHKP is ranked n Â° 5 in the Software – Security sector.
Radware Ltd. (RDWR)
RDWR is an Israel-based company providing cybersecurity and application delivery solutions for virtual, cloud and software-defined data centers around the world. The company sells its products primarily to independent distributors, including value-added resellers, original equipment manufacturers and system integrators.
On June 30, 2021, RDWR partnered with Acantho, a telecommunications subsidiary of the Italian group Hera, to provide cloud web application security protection to enterprise customers in Italy. Using RDWR’s hybrid protection against DDoS attacks, Acantho has upgraded its own infrastructure and will offer RDWR’s Cloud WAF service to improve service quality and application security and take advantage of growing business demand to reduce the risk of data breach and financial loss.
On June 10, RDWR partnered with Fujitsu, a Japanese information and communications technology equipment and services company, to enable increased traffic capacity for two Spanish healthcare organizations made necessary by the use of remote access during the COVID-19 pandemic. Fujitsu’s implementation of RDWR’s Alteon Application Delivery Controller is expected to enable it to capitalize on the growing need for online services and web content in the healthcare industry and streamline processes, manage patient data and reduce costs.
RDWR’s revenue for its fiscal fourth quarter, ended March 31, 2021, increased 11.3% year-on-year to $ 66.77 million. The company’s non-GAAP gross profit was reported at $ 55.01 million, representing a 10.3% year-over-year improvement. Its non-GAAP operating income was $ 7.48 million, up 54.9% from the prior year period. RDWR’s non-GAAP net income was reported at $ 8.02 million for the quarter, representing an increase of 20.7% from the prior year period. Its non-GAAP EPS increased 21.4% year-over-year to $ 0.17. The company had $ 38.98 million in cash and cash equivalents as of March 31, 2021.
The RDWR has beaten Street’s EPS estimates in three of the past four quarters. For the current quarter ending September 30, 2021, analysts expect RDWR’s revenue to rise to $ 67.12 million, an increase of 7.3% from the period of the previous year. The stock’s EPS is expected to grow 16% per year over the next five years. RDWR has gained 16.1% over the past three months to close yesterday’s trading session at $ 31.30.
It’s no surprise that RDWR has an overall rating of B, which equates to Buy in our POWR rating system.
The stock has an A grade for growth and quality. Click here to see the additional notes for RDWR (Value, Stability, Sentiment and Momentum).
RDWR is ranked # 2 in the Software Industry – Security.
NLOK shares were unchanged Wednesday after trading hours. Year-to-date, NLOK has gained 35.38%, compared to a 16.97% increase in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in finding market inefficiencies. She is passionate about educating investors so that they can be successful on the stock market. After…