The cybersecurity market is experiencing rapid growth as the demand to counter increasingly sophisticated threats intensifies. Cybercriminals are exploiting AI for advanced phishing, vishing, and deepfake fraud, heightening the need for robust digital protection.
In response, innovative tools and technologies are emerging to safeguard the expanding digital landscape, creating promising investment opportunities in the sector. As a result, leading cybersecurity stocks like Okta, Inc. (OKTA), Fortinet, Inc. (FTNT), and Check Point Software Technologies Ltd. (CHKP) offer compelling opportunities for investors.
The increasing frequency of attacks on critical infrastructure has spurred regulatory reforms, such as CIRCIA, urging organizations to implement stronger compliance measures and cybersecurity frameworks. These changes are driving investments in cybersecurity products. Global spending on information security is projected to reach $212 billion by 2025, reflecting a 15.1% increase from 2024.
Furthermore, zero-trust principles are gaining significant traction to combat insider threats and support remote workforces. To avoid vendor lock-in, mitigate risks, and foster innovation, companies are increasingly adopting diverse cybersecurity tools. As a result, the global cybersecurity market is expected to grow from $193.73 billion in 2024 to $562.72 billion by 2032, with a CAGR of 14.3%.
Let’s now dive into the fundamentals of the three Software - Security stocks highlighted above, starting with number three.
Stock #3: Okta, Inc. (OKTA)
OKTA operates as an identity partner internationally. The company offers a suite of products and services designed to manage and secure identities, including Single Sign-On, Adaptive Multi-Factor Authentication, API Access Management, Access Gateway, and Okta Device Access.
On October 16, 2024, OKTA announced new Workforce Identity Cloud capabilities to tackle security challenges like unmanaged SaaS accounts, governance risks, and social engineering attacks.
These innovations include Secure SaaS Service Accounts, Governance Analyzer with Okta AI, and stronger identity verification features, enhancing security while improving user experiences.
In terms of the trailing-12-month levered FCF margin, OKTA’s 28.20% is 149.4% higher than the 11.31% industry average. Likewise, its 76.12% trailing-12-month gross profit margin is 50.7% higher than the 50.52% industry average.
OKTA’s total revenue for the fiscal third quarter ended October 31, 2024, increased 13.9% year-over-year to $665 million. Its non-GAAP operating income was $138 million, up 62.4% year-over-year. Additionally, its non-GAAP net income and net income per share were $121 million and $0.67, respectively, reflecting increases of 53.2% and 52.3% compared to the prior-year quarter.
Street expects OKTA’s EPS and revenue for the quarter ending January 31, 2025, to increase 16.9% and 10.6% year-over-year to $0.74 and $669.25 million, respectively. It surpassed the consensus revenue estimates in each of the trailing four quarters. Over the past three months, the stock has gained 17% to close the last trading session at $84.79.
OKTA’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Sentiment. Within the B-rated Software - Security industry, it is ranked #8 out of 20 stocks. To access additional grades for OKTA’s Value, Momentum, Stability, and Quality ratings, click here.
Stock #2: Fortinet, Inc. (FTNT)
FTNT provides cybersecurity and converged networking and security solutions worldwide. It offers secure networking solutions focused on the integration of networking and security; network firewall solutions, including FortiGate data center, hyperscale, and distributed firewalls, as well as encrypted applications; wireless LAN solutions; and secure connectivity solutions.
On December 3, 2024, FTNT announced FortiAppSec Cloud, a unified platform for web application security and performance management. It integrates tools for API security, advanced bot defense, and global server load balancing, simplifying the protection and management of hybrid and multi-cloud environments.
On December 2, 2024, FTNT was announced as the "Preferred Partner" of the Vancouver Canucks for the 2024–2025 season, with Canucks Sports & Entertainment deploying FTNT’s Security Fabric and Secure SD-WAN solutions to enhance cybersecurity and streamline network management across its facilities.
In terms of the trailing-12-month Return on Common Equity margin, FTNT’s 311.53% is significantly higher than the 4.56% industry average. Similarly, its 28.86% trailing-12-month levered FCF margin is 155.3% higher than the 11.31% industry average. Additionally, its 26.79% trailing-12-month net income margin is 622.1% higher than the 3.71% industry average.
For the third quarter 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. During the same period, the company’s non-GAAP net income and non-GAAP net income per share grew 50.7% and 53.7%, respectively, to $487.60 million and $0.63.
Analysts expect FTNT’s EPS and revenue for the quarter ending December 31, 2024, to increase 19.1% and 12.7% year-over-year to $0.61 and $1.59 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 91.4% to close the last trading session at $99.21.
FTNT’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Sentiment and Quality. It is ranked #7 in the same industry. Beyond what we stated above, we also have given FTNT grades for Growth, Value, Momentum, and Security. Get all the FTNT ratings here.
Stock #1: Check Point Software Technologies Ltd. (CHKP)
CHKP develops, markets, and supports a range of products and services for IT security worldwide. The company offers a multilevel security architecture, as well as solutions for cloud, network, mobile devices, endpoints, information, and IoT.
On November 20, 2024, CHKP launched Quantum Firewall Software R82, featuring AI-powered engines to block 99.8% of zero-day threats. The update enhances threat prevention, DevOps agility, and operational simplicity, with innovations like post-quantum cryptography and seamless scalability for enterprise networks.
On October 1, 2024, CHKP announced the completion of its acquisition of Cyberint Technologies. This integration enhances the Infinity Platform with advanced external risk management, offering real-time threat intelligence, AI-powered risk detection, and proactive protection for businesses against cyber threats.
In terms of the trailing-12-month net income margin, CHKP’s 33.17% is 794.1% higher than the 3.71% industry average. Its 15.19% trailing-12-month Return on Total Assets is 636.5% higher than the 2.06% industry average. Also, its 34.60% trailing-12-month EBIT margin is 537.4% higher than the industry average of 5.43%.
During the third quarter ended September 30, 2024, CHKP’s total revenues increased 6.5% year-over-year to $635.10 million. The company’s non-GAAP operating income grew 1.9% from the year-ago value to $274 million. Similarly, CHKP’s non-GAAP net income and EPS were $255.40 million and $2.25, reflecting increases of 5.4% and 8.7%, respectively, from the prior year’s quarter.
For the quarter ending December 31, 2024, CHKP’s EPS is expected to increase 3.3% year-over-year to $2.65. Its revenue for the same quarter is expected to rise 5.3% year-over-year to $698.43 million. CHKP surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 29.3% to close the last trading session at $186.82.
CHKP’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #4 in the Software – Security industry. It has an A grade for Quality. To see CHKP’s Growth, Value, Momentum, Stability, and Sentiment ratings, click here.
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FTNT shares were trading at $97.13 per share on Monday afternoon, down $2.08 (-2.10%). Year-to-date, FTNT has gained 65.95%, versus a 28.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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