Cybercrime has been identified as a leading threat to the global economy over the next decade. With potential cybercrime costs surpassing $8 trillion in 2023, the need for effective cybersecurity strategies is more pressing than ever. Research suggests the cybersecurity market is likely to grow from $182.8 billion in 2024 to $314.3 billion by 2029, with an 11.4% compound annual growth rate (CAGR). As a result, Wall Street offers significant investment opportunities in cybersecurity companies leading the development of crucial security measures. With that information, let’s explore three cybersecurity stocks for your watchlist.
Akamai Technologies (AKAM)
The first name among our cybersecurity stocks is Akamai Technologies (NASDAQ:AKAM), an established player in cloud-based security solutions. The company’s Intelligent Edge Platform sits between businesses and the internet, acting as a powerful shield against cyber threats. As internet usage, data consumption, and reliance on cloud services soar, AKAM stock is poised to benefit.
Akamai’s management announced solid fourth quarter and full year results for 2023 in mid-February, delivering revenues of $995 million, up 7% year over year (YOY). Also, net income per diluted share saw significant growth, coming in at $1.69, up 23% YOY.
Recently, Akamai teamed up with Neural Magic, a developer of software that accelerates AI workloads. The partnership will boost its AI security, enhancing deep learning on its network. This highlights Akamai’s commitment to cybersecurity innovation, offering an efficient platform for deep learning on CPU servers.
Yet, Akamai stock has lost over 10% year to date (YTD). Meanwhile, the shares are changing hands at about 15 times forward earnings and 4.5 times sales. Wall Street’s 12-month price forecast stands at $127.18, suggesting an upside potential of 19% from the current price levels. True, AKAM stock may remain volatile in the short run. But long-term potential for growth and value creation makes it Akamai an attractive cybersecurity stock.
iShares Cybersecurity and Tech ETF (IHAK)
Next on our list of cybersecurity stocks is the iShares Cybersecurity and Tech ETF (NYSEARCA:IHAK). Targeting long-term growth, this ETF invests in global companies at the forefront of cybersecurity innovation.
Currently, IHAK has 35 holdings, where the top ten constitute about 45% of its portfolio. With net assets around $841 million, its investments are mainly allocated to the information technology (86.2%) and industrials (13.3%) sectors. Geographically, 72.6% of its investments are in U.S. companies, followed by Israel (9.63%), Japan (4.18%), and Taiwan (3.1%).
Leading holdings include Okta (NASDAQ:OKTA), CrowdStrike (NASDAQ:CRWD), Cyberark Software (NASDAQ:CYBR), Juniper Networks (NYSE:JNPR) and Fortinet (NASDAQ:FTNT).
So far this year, IHAK is up around 1.5%. Its trailing price-to-earnings (P/E) and price-to-book (P/B) ratios are 37.10x and 5.52x, respectively. Finally, investors should note that the ETF has an expense ratio of 0.47%.
Zscaler (ZS)
Today’s last pick, Zscaler (NASDAQ:ZS), is another prominent cloud security company. The company primarily sells subscriptions to its Falcon platform and cloud modules. It offers cloud-delivered protection of endpoints, cloud workloads, identity and data.
Recent earnings indicate revenues grew 35% YOY to $525 million. Additionally, free cash flow was $100.8 million, indicating financial stability and the potential for future investments in R&D and acquisitions.
In March, Zscaler acquired Avalor, a security startup focused on protecting against attacks that target data. The acquisition extends the Zscaler Zero Trust Exchange data with Avalor’s Data Fabric for Security, which uses AI to identify and protect sensitive data. This strategic move by Zscaler underscores management’s commitment to innovation.
However, ZS has lost over 17% YTD. Shares are trading at 63 times forward earnings and 14 times sales. Despite the relatively rich valuation, the 12-month median price forecast for Zscaler stock stands at $263.72 with an potential of over 40%. In other words, analysts remain optimistic about Zscaler’s potential for growth.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.