Tech stocks have taken a beating so far in 2022, but one Wall Street analyst sees buying opportunities among the carnage in cybersecurity stocks.
The Analyst: MKM Partners analyst Catharine Trebnick initiated coverage of five prominent cybersecurity stocks Friday:
- Fortinet Inc (NASDAQ: FTNT) initiated at Buy with a $70 price target.
- Palo Alto Networks Inc (NASDAQ: NASDAQ:PANW) initiated at Buy with a $250 target.
- Zscaler Inc (NASDAQ: ZS) initiated at Buy with a $225 target.
- Cyberark Software Ltd (NASDAQ: CYBR) initiated at Buy with a $190 target.
- Crowdstrike Holdings Inc (NASDAQ: CRWD) initiated at Buy with a $240 target.
The Takeaways: In the initiation notes, Trebnick said favorable trends in the cybersecurity market are strong enough to create a number of different winners in a difficult macroeconomic environment.
Trebnick said there are several reasons to like Fortinet, including its broad portfolio of products, its exposure to cloud security and its opportunities for convergence and consolidation to drive 20% revenue growth in 2022 and beyond. She said the company has a path to grow billings to $19 billion and revenue to $8 billion in 2025.
Trebnick said Network Security, Prisma Cloud and Security Operations are Palo Alto's three growth pillars. She also said Palo Alto's next-generation security segment would be one of the fastest growing cybersecurity businesses in the world if it were a standalone company.
Related Link: How to Win At Cybersecurity And Build A Culture Of Information Security: Become "Sneaker" CISO
Trebnick said Zscaler has an attractive long-term growth opportunity given roughly half of U.S. businesses do not have a cybersecurity risk plan. She said upselling from Zscaler's leading products Zscaler Internet Access (ZIA) and Zscaler Private Access (ZPA) have the potential to grow annual recurring revenue (ARR) to six times current levels.
Trebnick said CyberArk is also on the path to $1 billion in ARR by 2025 given how well it has executed its shift to a subscription model. She said cybersecurity stocks that generate a higher percentage of subscription revenue also tend to trade at higher market valuations as well.
Finally, Trebnick said CrowdStrike has one of the most comprehensive cloud-native platforms in the cybersecurity industry. She projects the company could reach $5 billion in ARR in fiscal 2026 via market share gains, high customer retention and expansion into adjacent markets.
Benzinga's Take: There's no question the cybersecurity market as a whole will continue to generate impressive growth numbers for the foreseeable future. Yet these leading cybersecurity companies must continue to innovate and adapt to a rapidly evolving threat landscape.
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