Digital technology is transforming enterprises and their operations while increasing cyber threats and data privacy concerns. It has resulted in enhanced attention toward cybersecurity and safety, opening several growth opportunities for the cybersecurity industry.
Given the industry’s bright prospects, fundamentally sound cybersecurity stocks Tenable Holdings, Inc. (TENB), Trend Micro Incorporated (TMICY), and Radware Ltd. (RDWR) could be ideal watchlist additions.
The Office of the National Cyber Director (ONCD) released the 2024 Report on the Cybersecurity Posture of the U.S., which acts as a report card on the implementation of the guidelines set by the National Cybersecurity Strategy, introduced in March 2023. The strategy was implemented with a vision of a defensible, resilient, and values-aligned digital ecosystem.
The federal government was tasked to complete 36 initiatives by the second quarter of 2024, and 33 initiatives, which accounted for 92%, were completed on time, narrating a positive outlook. Also, the government has taken actions like establishing cyber requirements to protect critical infrastructure and enhancing federal partnerships in the covered period.
Revenue in the cybersecurity market is projected to reach $183.10 billion in 2024. In global comparison, the U.S. will generate the most revenue, accounting for $78.31 billion this year. Further, it is expected to grow at a CAGR of 10.6% during the forecast period (2024-2028), resulting in a market volume of $273.60 billion by 2028.
Moreover, AI’s role in cybersecurity is becoming more crucial with time, driving innovation in threat detection, incident response, and predictive intelligence. The global AI in cybersecurity market is anticipated to reach $147.50 billion by 2033, registering a CAGR of 20.8%, influenced by technologies like speech recognition to enhance capabilities and automate tasks.
Considering the encouraging market trends, let’s delve into the fundamentals of the top three Software - Security stocks, beginning with the third choice.
Stock #3: Tenable Holdings, Inc. (TENB)
TENB provides cyber exposure solutions internationally. Its platforms include Tenable Vulnerability Management, Tenable Cloud Security, Tenable Identity Exposure, Tenable Web App Scanning, Tenable Lumin Exposure View, Tenable Attack Surface Management, Tenable Security Center, and Tenable OT Security.
On March 19, TENB expanded Tenable Cloud Security cloud-native application protection platform capabilities for Kubernetes on-premises and public cloud environments. The latest advancements extended TENB’s CNAPP benefits, such as contextual risk visibility, preventive security controls, and zero trust/east privilege enforcement, to Kubernetes.
The new Kubernetes features enable organizations to scale visibility across public and on-premises Kubernetes deployments, intercept risky deployments with preventive security controls, and evade long-standing privileges.
On March 13, TENB launched innovative enhancements to ExposureAI, the generative AI capabilities and services within its Tenable One Exposure Management Platform. The new features enable customers to quickly summarize relevant attack paths, directly query the AI engine, and receive specific mitigation guidance.
During the first quarter that ended March 31, 2024, TENB’s revenue increased 14.4% year-over-year to $215.96 million. Its non-GAAP gross profit rose 17.2% from the year-ago value to $174.68 million. The company’s non-GAAP income from operations of $37.01 million indicates growth of 104% from the prior year’s quarter.
In addition, the company’s non-GAAP net income and EPS came in at $30.44 million and $0.25, up 133% and 127.3% year-over-year, respectively. Its unlevered free cash flow grew 24% year-over-year to $54.74 million.
According to its second-quarter guidance, TENB expects its non-GAAP income from operations to be $34 million to $36 million. Its non-GAAP net income is expected to range from $28 million to $30 million, and its non-GAAP EPS is expected to be $0.22 - $0.24.
For the full year 2024, the company expects non-GAAP income from operations of $158 million - $163 million. Also, its non-GAAP net income is expected to range from $135 million to $140 million, and non-GAAP EPS is expected to be $1.08 - $1.12.
Analysts expect TENB’s revenue and EPS for the second quarter (ending June 2024) to increase 12.1% and 6.9% year-over-year to $218.53 million and $0.24, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, TENB’s stock has gained 1.2% and 6% over the past year to close the last trading session at $41.87.
TENB’s bright outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Growth and a B for Quality. Within the B-rated Software - Security industry, TENB is ranked #6 out of 22 stocks.
Click here to access additional ratings of TENB (Value, Sentiment, Stability, and Momentum).
Stock #2: Trend Micro Incorporated (TMICY)
Headquartered in Tokyo, Japan, TMICY develops and sells security-related software for computers and related services in Japan and internationally. It provides platforms like Vision One platform, attack surface management, extended detection and response, cloud security, endpoint security, network security, email security, OT/ICS security, and threat intelligence.
On May 1, TMICY launched significant additional AI-powered functionality in its platform to secure organizational use of AI and better manage the risks associated with the mass adoption of new AI tools. The latest platform updates are aimed at delivering new efficiencies to security teams and providing critical guidelines for AI use.
The new elements in Trend Vision One™ – Zero Trust Secure Access will expand TMICY’s leadership as the first vendor to emphasize securing AI services and the people using them across the enterprise.
On April 22, TMICY launched AI-driven cyber risk management capabilities across its entire flagship platform, Trend Vision One™. The platform seamlessly integrates over 10 industry technology categories into one offering, empowering security, cloud, and IT operations teams to manage risk proactively.
For the first quarter that ended March 31, 2024, TMICY’s net sales increased 12.3% year-over-year to ¥65.93 billion ($420.09 million). It reported a gross profit of ¥49.91 billion ($318.03 million), up 12.6% from the prior year’s quarter. The company’s operating income of ¥12.13 billion ($77.27 million) indicates growth of 27% year-over-year.
Additionally, the company’s net income came in at ¥10.75 billion ($68.52 million) and ¥78.83 per share, up 68.7% and 72% from the prior year’s quarter, respectively.
According to the fiscal year 2024 forecast, the company expects net sales of ¥271 billion ($1.73 billion) and operating income of ¥52.90 billion ($337.06 million). Also, TMICY’s net income attributable to owners of the parent is expected to be ¥34.60 billion ($220.46 million), and net income per share is expected to be ¥255.05.
Analysts expect TMICY’s revenue for the third quarter (ending September 2024) to increase 3.4% year-over-year to $438.50 million, and its EPS is expected to grow 907.1% year-over-year to $0.50 for the same quarter. Furthermore, the company’s revenue and EPS for fiscal 2024 are expected to increase 209.6% and 228.1% year-over-year to $1.71 billion and $1.71, respectively.
The stock has surged 7.8% over the past nine months to close the last trading session at $45.60.
TMICY’s POWR Ratings reflect its bright prospects. The stock has an overall grade of B, translating to a Buy in our proprietary rating system.
TMICY has a B grade for Quality, Value, and Stability. It is ranked #3 among 22 stocks within the B-rated Software - Security industry.
To see the other ratings of TMICY for Sentiment, Growth, and Momentum, click here.
Stock #1: Radware Ltd. (RDWR)
Based in Tel Aviv, Israel, RDWR develops, manufactures, and markets cyber security and application delivery solutions for cloud, on-premises, and software-defined data centers globally. The company operates in two segments: Radware's Core Business and The Hawks' Business.
On May 14, RDWR signed a managed security service provider agreement with Lightpath, an all-fiber, infrastructure-based connectivity provider. Under the deal, Lightpath will leverage RDWR’s AI-powered DefensePro® DDoS Protection to offer customers a DDoS scrubbing service designed to combat increasingly complex threats.
On April 17, RDWR’s Cloud Web Application Firewall (WAF) and Emergency Response Team Services were selected by MotivationWorks Inc. MotivationWorks selected RDWR to improve the security and availability of its cloud services and address the surge in increasingly sophisticated Web DDoS attacks.
Also, on the same day, RDWR introduced a new AI-powered, rule-free edition of its DNS DDoS Protection solution. With RDWR’s patented algorithms, the enhanced version has been designed to automatically distinguish between legitimate and attack traffic and instantly adapt DDoS defenses based on the specific attacker.
During the first quarter that ended on March 31, 2024, RDWR reported revenues of $65.08 million, while its non-GAAP gross profit was $53.34 million. The company’s non-GAAP net income and EPS were $6.83 million and $0.16, increases of 12.2% and 14.3% year-over-year, respectively.
Moreover, the company’s total assets stood at $587.21 million as of March 31, 2024, compared to $571.92 million as of December 31, 2023.
Street expects RDWR’s EPS for the second quarter (ending June 2024) to increase 61.2% year-over-year to $0.16. Its revenue is expected to grow 0.6% year-over-year to $65.99 million for the current quarter. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 1.2% and 65% year-over-year to $264.38 million and $0.71, respectively.
Shares of RDWR have gained 19.7% over the past month and 32.3% over the past six months to close the last trading session at $20.18.
RDWR’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
RDWR has an A grade for Quality. It also has a B grade for Sentiment and Growth. It is ranked #2 among 22 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have RDWR’s ratings for Value, Momentum, and Stability. Get all RDWR ratings here.
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TMICY shares were trading at $45.60 per share on Friday morning, up $0.49 (+1.10%). Year-to-date, TMICY has declined -14.57%, versus a 10.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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