As our cyber landscape becomes increasingly interconnected, the demand for adaptable, multi-faceted, and self-evolving security systems has become imperative. The rise of mobile-connected devices, electronic communication, social media dominance, and the expanding role of Big Data have collectively underscored the urgency for cybersecurity defenses to keep pace with evolving threats.
Capitalizing on the industry’s tailwinds, fundamentally sound stocks like Fortinet, Inc. (FTNT), Check Point Software Technologies Ltd. (CHKP), and Trend Micro Incorporated (TMICY), where investors seem to pool their money.
But before we dive into the fundamentals of these stocks, let’s discuss the industry’s future growth prospects.
The rise of hybrid work and increased reliance on cloud services have led to a significant surge in cloud usage. Safeguarding critical data on the cloud is crucial to prevent financial losses and market instability.
As a result, the cybersecurity market for cloud computing has come into the limelight. Spending on public cloud security services is forecasted to grow from $19.40 billion in 2022 to $48.90 billion in 2026, exhibiting a CAGR of 20.3%.
In addition, the convergence of generative AI and cybersecurity holds great promise for the future. AI-powered security solutions are proving to be effective in combating cybercrime by rapidly detecting, analyzing, and responding to threats in real-time.
This advanced technology also reduces false positives by filtering out non-threatening activities. The global AI in cyber-security market is expected to reach $49.23 billion in 2027, growing at a CAGR of 25.3%.
These fronts could make cyber security the biggest tech market for the coming years and beyond as the physical world gets increasingly incorporated with the virtual. Furthermore, the cyber security market is poised to expand at a CAGR of 13.6% over the next four years.
Let’s dive deeper into the fundamentals of the featured stocks in detail:
Fortinet, Inc. (FTNT)
FTNT offers comprehensive, integrated, and automated cybersecurity and networking solutions globally. Its products include FortiGate hardware and software licenses, FortiSwitch for secure switching, and FortiAP for wireless networking.
On August 3, FTNT introduced FortiGate 90G, a pioneering Secure SD-WAN appliance and NGFW featuring the advanced security processing unit 5 (SP5) ASIC. This innovation brings exceptional AI-driven threat protection performance, scalability, and energy efficiency, all at a competitive cost.
This addition bolsters FTNT’s Secure Networking range, enhancing its capacity to provide uniform security, streamlined management, analytics, and FortiGuard AI-Powered Security Services across hybrid networks.
On June 7, FTNT announced that 11 new Managed Security Service Providers (MSSPs) have adopted Fortinet Secure SD-WAN to drive better customer business outcomes and experiences. This move reflects the strong demand for FTNT’s offerings while also helping it stay competitive in the rapidly evolving networking market.
For the fiscal second quarter that ended June 30, 2023, FTNT’s total revenue increased 25.5% year-over-year to $1.29 billion, while its gross profit increased 27.9% year-over-year to $997 million. Its non-GAAP operating income grew 36.3% from the year-ago value to $348.10 million.
The company’s adjusted net income attributable to FTNT came in at $300.40 million and $0.38 per share, representing increases of 54.8% and 58.3%, respectively, from the prior-year quarter.
The company’s free cash flow stood at $438.30 million, up 54.6% year-over-year, while its net cash provided by operating activities increased 59.3% year-over-year to $515.10 million,
The consensus revenue estimate of $1.35 billion for the third quarter (ending September 2023) represents a 17.6% increase year-over-year. The consensus EPS estimate of $0.37 for the current quarter indicates a 10.6% improvement year-over-year. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 20.3% year-to-date to close the last trading session at $58.81.
FTNT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FTNT also has an A grade for Quality and a B for Sentiment. It is ranked #4 out of 21 stocks in the Software – Security industry. Click here to see the other ratings of FTNT for Growth, Value, Momentum, and Stability.
Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP offers a wide range of products and services for IT security globally. It provides multilevel security, cloud, network, endpoint protection, IOT solutions, and threat prevention technologies to enterprises, service providers, Small and Medium-Sized Businesses (SMBs), and consumers.
On August 10, CHKP announced the acquisition of Perimeter 81, a Security Service Edge (SSE) pioneer, to enhance secure access across remote users, cloud, and data centers. The deal, valued at about $490 million, aligns with the company’s goal of delivering a robust and efficient SSE solution. Perimeter 81’s user-friendly approach and capabilities will integrate into CHKP’s architecture for unified security.
On June 23, CHKP partnered with communications technology company TELUS to launch the TELUS Cloud Security Posture Management (CSPM) service in Canada. Backed by the company’s AI-powered threat prevention and high-fidelity posture management technology, TELUS CSPM provides a comprehensive managed solution for Canadian organizations to monitor cloud security posture in real-time and detect, remediate, and report vulnerabilities.
During the fiscal second quarter that ended June 30, 2023, CHKP’s total revenues increased 3.1% year-over-year to $588.70 million. Its non-GAAP operating income grew 5.8% from the year-ago value to $263.10 million, while its non-GAAP net income came in at $238.3, up 13.9% year-over-year. Also, the company’s non-GAAP EPS increased 22% from the prior year quarter to $2.
For the third quarter ending September 30, 2023, CHKP’s revenue is expected to increase 2.5% year-over-year to $592.25 million. Its EPS estimate of $2.02 for the current quarter indicates a 14.2% improvement year-over-year. Additionally, it topped the EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 9.6% to close the last trading session at $134.43.
CHKP’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system. It has an A grade for Quality.
Within the same industry, it is ranked #2. Click here to view CHKP’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
Trend Micro Incorporated (TMICY)
TMICY, based in Japan, develops and sells security software for computers and the Internet. It offers hybrid cloud security, intrusion prevention, cloud migration, network defense, security for small and medium-sized enterprises, endpoint security, and 5G security solutions.
On August 22, TMICY expanded its partner program and introduced a new offering, Trend Vision One™ for Service Providers, aimed at empowering MSSPs and MDR companies to enhance their Managed Detection and Response (MDR) and SOC-as-a-service offerings. The new offering could benefit the company.
On June 15, TMICY launched its new Vision One platform, which integrates extended detection and response (XDR), attack surface risk management (ASRM), and zero-trust cybersecurity capabilities.
A new notable addition is the gen AI-powered assistant, Trend Vision One Companion, aiding Security Operation Center (SOC) analysts by responding to natural language queries, facilitating threat hunting, and expediting remediation processes. Through this integration, TMICY not only plans on driving a more efficient system but also sets out to accomplish itself in the generative AI space.
TMICY’s net sales for the six-month period ended June 30, 2023, increased 13.5% from the previous year’s period to ¥119.54 billion ($816.02 million), while its operating income stood at ¥18.19 billion ($124.16 million). Its gross profit stood at ¥90.03 billion ($614.61 million), up 12.8% year-over-year.
Net income attributable to owners of the parent amounted to ¥11.86 billion ($80.94 million) and ¥85.80 per share in the same period. Additionally, the company’s cash and cash equivalents at the end of the period increased 5.7% year-over-year to ¥209.22 billion ($1.43 billion).
Street expects TMICY’s revenue to increase 4.6% year-over-year in the current quarter (ending September 30, 2023) to $420.71 million. For the fiscal year 2023, its revenue is projected to reach $1.68 billion, registering a substantial increase of 174.1% from the prior-year period. Its EPS is expected to increase by 12.1% per annum over the next five years.
TMICY shares have gained marginally over the past five days to close the last trading session at $41.98.
It’s no surprise that TMICY has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Stability and a B for Value and Quality. Out of 21 stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have TMICY’s ratings for Growth, Momentum, and Sentiment. Get all TMICY ratings here.
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FTNT shares were trading at $58.96 per share on Monday afternoon, up $0.15 (+0.26%). Year-to-date, FTNT has gained 20.60%, versus a 16.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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