As cloud software soars in popularity, driven by efficiency, ease of access, and remote work trends, the cybersecurity market is booming. With cyber threats on the rise, governments are also stepping in with initiatives to protect businesses, making strong cybersecurity measures an urgent priority for the future.
Considering this surge in cybersecurity demand, investors could grab shares of fundamentally stable cybersecurity stocks, Rapid7, Inc. (RPD), Check Point Software Technologies Ltd. (CHKP), and Fortinet, Inc. (FTNT). These companies are well-positioned to capitalize on the growing need for robust cybersecurity solutions.
Cyber threats have been on a steep rise since the dawn of cloud-computing. Data breaches, phishing, ransomware attacks are becoming quite a common scene for most businesses. However, small businesses have become the primary target due to their little to no cyber-protection.
In fact, more than 40% of small businesses have fallen victim to some form of cyber attack. The United States is a major hotspot, accounting for 59% of all ransomware attacks globally.
The severe nature of this problem calls for strong security measures to protect businesses and regular consumers alike. The urgency of the situation has not gone unnoticed, with the U.S. government acknowledging the growing risks and taking action to address the increasing threat landscape.
For fiscal year 2025, the federal budget allocates $13 billion in cybersecurity funding across civilian departments and agencies. In addition, the Cybersecurity and Infrastructure Security Agency (CISA) receives an additional $103 million, bringing its total funding to $3 billion to enhance cyberspace resilience and defense.
Owing to the worldwide rise of cybersecurity, a study by Fortune Business Insights projects that the global cybersecurity market will reach $562.72 billion by 2032, growing at a CAGR of 14.3%.
Now, let us dive deep into the fundamentals of three cybersecurity stocks, starting with #3.
Stock #3: Rapid7, Inc. (RPD)
RPD is a global cybersecurity software and services provider that combines information security, cloud operations, development, and IT teams to understand attackers and control their attack surface. The company’s flagship product is called Rapid7 Managed Threat Complete (MTC).
On November 18, RPD announced the expansion of its Managed Extended Detection and Response (MXDR) service to provide comprehensive threat detection, investigation, and response across core Microsoft security tools. This move could enhance RPD's service offerings and strengthen its position in the cybersecurity market.
On September 17, RPD announced the availability of Vector Command, a fully-managed offensive security service. With the demand for security services going through the roof, the new release could place the company in a leading market position and gather widespread popularity.
For the fiscal 2024 third quarter that ended September 30, RPD’s total revenue increased 8% year-over-year to $214.65 million. Its non-GAAP gross profit rose 7.2% from the year-ago value to $159.05 million. Plus, the company’s adjusted EBITDA grew 16.7% from the previous year’s quarter to $50.08 million.
Additionally, RPD’s non-GAAP net income and non-GAAP net income per share grew 40.5% and 32% year-over-year to $47.76 million and $0.66, respectively.
Analysts expect RPD’s revenue and EPS for the fiscal year ending December 2024 to increase 8% and 50.7% year-over-year to $840.04 million and $2.29, respectively. The company topped the consensus revenue and EPS estimates in all of the four trailing quarters, which is impressive.
Shares of RPD have surged 4.7% over the past three months to close the last trading session at $39.33.
RPD’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RPD has a B grade for Value. It is ranked #8 out of 20 stocks in the B-rated Software – Security industry.
In addition to the POWR Rating highlighted above, you can check RPD’s ratings for Stability, Growth, Quality, Momentum, and Sentiment here.
Stock #2: Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP offers IT security products and services to enterprises, service providers, small and medium-sized businesses, and consumers. The company’s offerings include multilevel security architecture, cloud, network, mobile devices, endpoints information, and IOT solutions.
On October 1, CHKP announced the completion of acquisition of Cyberint Technologies Ltd., a provider of external risk management solutions. By integrating Cyberint’s real-time exposure analysis into the Infinity Platform, CHKP could enhance its threat prevention capabilities, broaden market reach, and position itself for stable growth.
On September 2, CHKP announced the unveiling of its innovative portal designed for both managed security service providers (MSSPs) and distributors. With new releases catering to the rising MSSP market, CHKP is set to enhance its revenue streams and gather a leading market position.
For the fiscal third quarter that ended on September 30, 2024, CHKP’s total revenues increased 6.5% year-over-year to $635.10 million. Its non-GAAP operating income rose 1.9% from the year-ago value to $274 million.
In addition, the company’s non-GAAP net income and non-GAAP EPS rose 5.4% and 8.7% from the prior year’s quarter to $255.40 and $2.25, respectively.
Street expects CHKP’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase 5.3% and 3.3% year-over-year to $698.43 million and $2.65, respectively. Moreover, the company surpassed the consensus revenue and EPS estimates in three of the four trailing quarters.
CHKP’s shares have surged 14.8% over the past six months and 21.9% over the past year to close the last trading session at $173.53.
CHKP’s positive fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
CHKP has an A grade for Quality. Within the Software - Security industry, it is ranked #7 out of 20 stocks.
Click here to access CHKP’s ratings for Stability, Value, Momentum, Growth, and Sentiment.
Stock #1: Fortinet, Inc. (FTNT)
FTNT offers an integrated platform called the Fortinet Security Fabric, which includes networking, unified Secure Access Service Edge (SASE), and AI-driven security operations. It caters to various industries, including financial services, retail, government organizations, small and medium-sized businesses, and more.
On November 15, FTNT announced the opening of its new innovation hub in Atlanta, Georgia. With this new opening, FTNT would contribute towards job growth and development in the region while enhancing its market presence and supporting the company's long-term growth and innovation goals.
On November 7, FTNT announced the expansion of generative AI (GenAI) capabilities across its product portfolio with the launch of two new integrations with FortiAI, its AI-powered security assistant that uses GenAI to guide, simplify, and automate security analyst activities.
With this release, FTNT is poised to be at the forefront of the AI-powered security rush and enhance its overall growth prospects.
For the fiscal 2024 third quarter that ended September 30, FTNT’s total revenue increased 13% year-over-year to $1.51 billion. Its non-GAAP operating income rose 46.7% from the year-ago value to $544.70 million.
Plus, the company’s non-GAAP net income and non-GAAP net income per share grew 50.7% and 53.7% from the prior year’s quarter to $487.60 million and $0.63, respectively.
The consensus revenue and EPS estimates of $1.60 billion and $0.61 for the fiscal fourth quarter ending December 2024 exhibit a year-over-year rise of 12.7% and 19%, respectively. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the four trailing quarters.
Shares of FTNT have gained 34.2% over the past nine months and 79.2% over the past year, closing the last trading session at $91.88.
FTNT’s bright prospects are projected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
FTNT has an A grade for Sentiment and Quality. It is ranked #6 out of 20 stocks within the same industry.
Click here to access FTNT’s ratings for Stability, Growth, Value, and Momentum.
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FTNT shares were unchanged in premarket trading Tuesday. Year-to-date, FTNT has gained 56.98%, versus a 24.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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