The cybersecurity market is expected to see substantial growth recently due to the increasing frequency and complexity of cyber-attacks. Businesses, governments, and individuals are becoming more aware of the need to protect their digital infrastructure and sensitive information.
Given this backdrop, investors could keep a watchful eye on fundamentally strong software-security stocks, Fortinet, Inc. (FTNT), Qualys, Inc. (QLYS), and Check Point Software Technologies Ltd. (CHKP) this year.
Due to the worldwide proliferation of digital technologies, individuals and organizations increasingly acknowledge the vulnerabilities associated with cybersecurity and are actively pursuing resilient protection measures for their online endeavors, including remote work and digital transactions.
By 2025, the global cost of cybercrime is expected to hit $10.50 trillion annually. Therefore, to curb the costs and impacts of rising cyber threats, the global cybersecurity market is estimated to grow at a CAGR of 11% to reach $533.9 billion by 2032.
Moreover, revenue in the cybersecurity market is projected to reach $185.70 billion in 2024. In global comparison, the United States will generate the most revenue, accounting for $81.37 billion this year.
Given these encouraging trends, let’s look at the fundamentals of the top three Software - Security stocks, beginning with the third choice.
Stock #3: Fortinet, Inc. (FTNT)
FTNT offers cybersecurity and networking solutions globally. The company’s FortiGate hardware and software licenses provide various security and networking functions. It also offers the FortiSwitch product family, which provides secure switching solutions for connecting customers to their end devices.
On June 10, 2024, FTNT announced that it had entered into a definitive agreement to acquire Lacework, the data-driven cloud security company.
FTNT intends to integrate Lacework’s CNAPP solution into Fortinet’s Unified SASE offering, forming one of the most comprehensive, full-stack AI-driven cloud security platforms available from a single vendor. This would help customers identify, prioritize, and remediate risks and threats in complex cloud-native infrastructure from code to cloud.
On May 2, 2024, FTNT unveiled a new next-generation firewall (NGFW) appliance with the industry-leading security and networking performance needed to serve as the backbone of the modern campus.
These features enable organizations to efficiently support and secure the growing volume of data-rich traffic and cloud-based applications within campus environments. This new next-gen firewall is expected to empower customers to meet evolving business needs, mitigate risk, and ensure a positive user experience.
FTNT’s trailing-12-month gross profit margin of 77.13% is 53.8% higher than the industry average of 50.14%. Also, its trailing-12-month EBIT margin of 23.80% is 409.6% higher than the industry average of 4.67%. Likewise, its trailing-12-month EBITDA margin of 25.92% is 169.4% higher than the industry average of 9.62%.
FTNT’s total revenue increased 7.1% year-over-year to $1.35 billion for the first quarter that ended March 31, 2024. Total gross profit grew 9.9% from the year-ago value to $1.05 billion. The company’s non-GAAP operating income was $386.10 million, up 15.6% from the prior year’s quarter.
In addition, non-GAAP net income came in at $333.90 million, or $0.43 per share, showing increases of 23.1% and 26.5% year-over-year, respectively.
Analysts predict FTNT’s revenue for the second quarter (ending June 2024) to increase 8.7% year-over-year to $1.41 billion. Its EPS for the ongoing quarter is expected to grow 8.3% from the prior year’s quarter to $0.41. Moreover, the company has an excellent earnings surprise history, surpassing consensus EPS estimates in each of the trailing four quarters.
FTNT’s stock has surged 10.1% over the past six months to close the last trading session at $60.62.
FTNT’s fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
FTNT has an A grade for Quality. It is ranked #9 out of 22 stocks in the B-rated Software - Security industry.
In addition to the POWR Ratings we’ve stated above, we also have FTNT ratings for Momentum, Growth, Sentiment, Value, and Stability. Get all FTNT ratings here.
Stock #2: Qualys, Inc. (QLYS)
QLYS offers cloud-based information technology (IT), security, and compliance solutions internationally. It provides Qualys Cloud Apps, which include Vulnerability Management, Threat Protection, Continuous Monitoring, Patch Management, and Multi-Vector Endpoint Detection and Response. It also offers asset tagging and management, reporting, and dashboards.
On May 6, 2024, QLYS announced the launch of CyberSecurity Asset Management 3.0, an expansion of the Enterprise TruRisk Platform.
This update combines its top-tier vulnerability assessment capability with its External Attack Surface Management (EASM) solution, providing a precise, real-time overview of the external attack surface. This integration reduces false positives and helps mitigate the risk associated with unidentified assets.
On May 2, 2024, QLYS announced the launch of its Managed Security Services Partner (MSSP) Portal as part of the growth and evolution of its partner management strategy.
QLYS' global MSSP partners have access to a unified platform that streamlines client, subscription, and security services management for enhanced operational efficiencies, enabling increased revenue opportunities and improved operating margins.
QLYS’ trailing-12-month EBIT margin of 30.31% is 548.9% higher than the industry average of 4.67%. Likewise, the stock’s trailing-12-month gross profit margin of 81.09% is 61.7% higher than the industry average of 50.14%. Its trailing-12-month ROTC of 28.83% is 981.5% higher than the industry average of 2.67%.
During the first quarter that ended March 31, 2024, QLYS’ revenues increased 11.6% year-over-year to $145.81 million. It reported a non-GAAP gross profit of $121.37 million, up 14.4% from the prior year’s quarter. The company’s non-GAAP net income came in at $54.74 million, or $1.43 per share, up 33% and 33% year-over-year, respectively.
Analysts expect QLYS’ revenue for the second quarter (ending June 2024) to increase 8.5% year-over-year to $148.81 million. Its EPS is expected to rise 3.8% year-over-year to $1.32 for the same quarter. Furthermore, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Shares of QLYS have gained 7.9% over the past year to close the last trading session at $140.48.
QLYS’ solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
QLYS has an A grade for Quality. It is ranked #8 among 22 stocks in the same industry.
Click here to access additional QLYS ratings (Momentum, Growth, Sentiment, Value, and Stability).
Stock #1: Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security worldwide. The company offers a multilevel security architecture, cloud, network, mobile devices, endpoints information, and IOT solutions.
On June 11, 2024, CHKP announced CloudGuard WAF-as-a-Service (WAFaaS). This automated, AI-powered web application firewall offers organizations a fully managed solution to prevent cyber threats and protect web applications from unauthorized access and data breaches.
This technology prioritizes prevention, simplicity, and scalability and is expected to deliver a convenient and cost-effective way to secure cloud applications and APIs efficiently.
On March 26, 2024, CHKP announced a collaboration with Microsoft that utilizes the Microsoft Azure OpenAI Service to enhance Check Point Infinity AI Copilot, marking a significant advancement in cyber security AI applications.
Infinity AI Copilot is a generative AI service that uses automation to accelerate security administration by up to 90% and increase security effectiveness through faster incident mitigation and response.
CHKP’s trailing-12-month gross profit margin of 89.03% is 79.5% higher than the industry average of 49.61%. Also, its trailing-12-month EBIT margin of 36.50% is 675.4% higher than the industry average of 4.71%. Likewise, its trailing-12-month EBITDA margin of 38.17% is 295.1% higher than the industry average of 9.66%.
CHKP's total revenues from products and security subscriptions increased 5.8% year-over-year to $598.80 million during the first quarter, which ended March 31, 2024. Its operating income was reported at $193.90 million. The company’s net income was reported at $183.90 million. Additionally, the company’s EPS increased 5.3% year-over-year to $1.60.
Street expects CHKP’s revenue for the second quarter (ending June 2024) to increase 5.9% year-over-year to $623.38 million, and its EPS for the same quarter is expected to grow 8% year-over-year to $2.16. Moreover, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of CHKP have soared 25.8% over the past year to close the last trading session at $158.
CHKP’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has an A grade for Quality. Within the same industry, CHKP is ranked #4.
Click here to access additional ratings of CHKP for Stability, Growth, Sentiment, Value, and Momentum.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
FTNT shares were trading at $60.43 per share on Thursday afternoon, down $0.19 (-0.31%). Year-to-date, FTNT has gained 3.25%, versus a 14.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Cybersecurity Stocks to Protect Your Portfolio in 2024 StockNews.com
