The rapid rise of technological advancements and AI-driven innovations has brought great convenience but also leaves us more vulnerable to cyber threats and privacy breaches. These dangers aren’t confined to just one nation but have a global impact, making cybersecurity solutions more critical than ever.
Given this landscape, it could be wise for investors to keep an eye on cybersecurity stocks such as Fortinet, Inc. (FTNT), Check Point Software Technologies Ltd. (CHKP), and Clear Secure, Inc. (YOU).
In the second quarter of 2024, there has been a 30% rise in weekly attacks on corporate networks compared to the same period in 2023 and a 25% increase from the first quarter of 2024. That’s an average of 1,636 attacks per organization per week.
As remote work continues to rise, securing the data stored in cloud-based systems has become essential to fend off increasing cyberattacks and threats. The recent software glitch at CrowdStrike Holdings, Inc. (CRWD), which resulted in a major tech outage and left millions of Windows users locked out of their devices, highlights the need for advanced cybersecurity.
That being said, while organizations are swiftly adopting new defenses, there is still ample opportunity for innovation in strengthening cybersecurity measures. Accordingly, the increasing threat of cybercrime has made governments and organizations invest billions in beefing up digital security.
Moreover, the Biden-Harris administration has proposed $13 billion in cybersecurity funding across civilian departments and agencies. Additionally, the fiscal 2025 proposal allocates $3 billion to the Cybersecurity and Infrastructure Security Agency (CISA), marking a $103 million increase from its current budget.
According to Statista, the global cybersecurity market is expected to reach $185.70 billion, exhibiting a CAGR of 7.9%.
With that in mind, let’s analyze the fundamentals of the above-mentioned three Software - Security stocks, beginning with #3.
Stock #3: Fortinet, Inc. (FTNT)
FTNT provides cybersecurity and convergence of networking and security solutions worldwide. The company offers secure networking solutions focusing on the convergence of networking and security, network firewall solutions, wireless LAN solutions, and secure connectivity solutions.
On August 27, FTNT announced the addition of sovereign SASE and generative AI capabilities to its robust unified SASE solution. Fortinet Unified SASE provides complete integration between Fortinet’s Secure SD-WAN solution and cloud-delivered security service edge (SSE) under a single console for seamless management, visibility, and security. This new update offers customers unparalleled deployment flexibility and simplicity.
On August 6, the company acquired Next DLP, an insider risk and data protection leader. This acquisition will help FTNT to improve its position in the standalone enterprise data loss prevention (DLP) market and strengthen its leadership in integrated DLP markets within endpoint and SASE in alignment with its business strategy.
For the fiscal second quarter of 2024, which ended on June 30, FTNT’s total revenues increased 10.9% year-over-year to $1.43 billion. Its gross profit rose 16.3% from the year-ago value to $1.16 billion.
Its non-GAAP operating income stood at $503.60 million, up 44.7% year-over-year, while its non-GAAP net income amounted to $439.90 million, representing an increase of 46.4% from the last year. Also, the company’s non-GAAP EPS for the quarter increased 50% year-over-year to $0.57.
Street expects FTNT’s revenue for the fiscal third quarter ending September 2024 to increase 10.9% year-over-year to $1.48 billion. Moreover, its EPS estimate of $0.52 for the same period indicates a 26.7% year-over-year growth. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
FTNT shares have surged 29.1% over the past nine months and 34.4% over the past year to close the last trading session at $77.21.
FTNT’s 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. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
FTNT has an A grade for Quality and a B for Sentiment. It is ranked #7 out of 23 stocks in the Software - Security industry.
In addition to the POWR Ratings we’ve stated above, we also have FTNT ratings for Momentum, Growth, Value, and Stability. Get all FTNT ratings here.
Stock #2: 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 globally. The company offers a multilevel security architecture, cloud, network, mobile devices, endpoint information, and IOT solutions.
On September 2, CHKP announced the release of its innovative Portal designed for managed security service providers (MSSPs) and distributors. The newly unveiled platform significantly simplifies service delivery and increases the ease of doing business with the company.
On August 27, CHKP announced signing a definite agreement to acquire Cyberint Technologies Ltd., a pioneering provider of External Risk Management solutions. With this acquisition, CHKP’s Security Operations Center (SOC) capabilities are set to be enhanced along with an expansion of its managed threat intelligence offerings.
For the fiscal second quarter that ended June 30, 2024, CHKP’s total revenues stood at $627.40 million, up 6.6% year-over-year, while its non-GAAP operating income increased marginally from the year-ago value to $265.10 million. The company’s non-GAAP net income and earnings per share increased 3.2% and 8.5% over the prior-year quarter to $246 million and $2.17, respectively.
The consensus revenue estimate of $635.06 million for the fiscal third quarter (ending September 2024) represents a 6.5% increase year-over-year. The consensus EPS estimate of $2.25 for the ongoing quarter indicates an 8.7% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
CHKP shares have surged 26.9% over the past nine months and 46.1% over the past year to close the last trading session at $195.
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 #6.
Click here to access additional ratings of CHKP for Stability, Growth, Sentiment, Value, and Momentum.
Stock #1: Clear Secure, Inc. (YOU)
YOU operates a secure identity platform under the CLEAR brand, featuring a multi-layered infrastructure for enrollment, verification, and identity linking. It offers the CLEAR Plus aviation subscription service and CLEAR mobile app for member enrollment and experience enhancement, ensuring robust front-end and back-end security.
On September 24, YOU opened four new locations to enroll and renew consumers in its Trusted Traveler program. There are now 51 TSA PreCheck enrollment locations open across the United States. The expansion is important in the company’s mission to serve its customers with a fast and efficient airport experience.
On July 17, YOU launched its signature identity verification technology at Honolulu’s Daniel K. Inouye International Airport (HNL) to streamline its security screening experience. The launch marks a significant step in YOU’s expansion. With its opt-in CLEAR Plus membership, YOU now serves 58 airports nationwide and has over 22 million members.
YOU’s revenue increased 24.6% year-over-year to $186.75 million in the fiscal 2024 second quarter that ended June 30, 2024. Its operating income was $30.34 million, significantly increasing from $217 thousand in the previous year’s quarter. The company’s adjusted EBITDA stood at $47.45 million, up 137.1% year-over-year.
In addition, YOU’s adjusted net income was $49.27 million or $0.34 per share, increasing 116% and 126.7% year over year, respectively.
Analysts expect YOU’s revenue for the fiscal third quarter (ending September 2024) to grow 21.3% year-over-year to $194.62 million. Its EPS is expected to rise 57% from last year’s period to $0.33. Moreover, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of YOU have surged 11.3% over the past month and 70.3% over the last three months to close the last trading session at $32.13.
YOU’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
YOU has a B grade for Growth, Value, and Quality. It is ranked #5 out of 23 stocks in the B-rated Software - Security industry.
In addition to the POWR Ratings highlighted above, one can access YOU’s ratings (Momentum, Stability, and Sentiment) here.
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FTNT shares were trading at $77.57 per share on Friday afternoon, up $0.36 (+0.47%). Year-to-date, FTNT has gained 32.53%, versus a 21.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
3 Cybersecurity Stocks to Watch as Data Breaches Surge StockNews.com
