One of the biggest threats to corporate America is ransomware. The growing possibility of losing access to essential or confidential digital property is a nightmarish scenario for executives as the financial consequences can be enormous.
But it’s not just major companies that are at risk. We are all threatened with the loss of personal data security as hackers continue to develop new ways to exploit networks, software, and the array of evolving technology services. As the world advances to become more digitized, so too do its threats.
According to Research and Markets, the global network security market size reached a valuation of $4.68 billion in 2021. Experts project that by 2027, the segment will command a valuation of $16.6 billion, representing a CAGR of 23.5% from 2023 estimates.
Online security is a young, quickly evolving industry. Competition is heavy in the space, and demand continues to grow faster in both volume and complexity. Not all companies from the burgeoning subsector are set to last. In this article, our team examines three attractive tickers set to benefit as demand for protection from cyber abuses continues to grow.
Palo Alto Network Inc. (PANW) is a top choice for customers looking to stay ahead of quickly evolving cybersecurity threats. For ten years straight, the company has been named as a market leader in network firewalls by leading research and advisory company, Gartner. In fact, it achieved the highest position for ability to execute and the furthest position for completeness of vision in Gartner’s Magic Quadrant for Network Firewalls for 2021. Still, they haven’t been letting the recognition go to their head. Over the past few years, Palo Alto has aggressively expanded its portfolio with extensive investments and acquisitions.
The groundbreaking acquisition of Bridgecrew, a developer-first cloud security company, enabled Palo Alto’s Prisma Cloud to become the first cloud security platform to deliver security across the entire lifecycle of an application, from the building stage to deployment to run. This is the most recent in a string of additions to its NGS (next-generation security) services portfolio.
In fiscal 2021, Palo Alto’s NGS services generated $1.18 billion in annual recurring revenue (ARR), representing roughly 28% of its top line and surpassing its prior ARR guidance of $1.15 billion. That segment’s accelerating growth complemented the stable development of its on-site appliances and services, and its total revenue increased 25% for the full year.
Palo Alto serves more than 85,000 customers today, compared to about 9,000 customers nine years ago. The company expects its revenue to rise 24%-25% in fiscal 2022, and its stock trades at about fifteen times that forecast. Down 18% from its April high, PANW may be a solid choice to add to your portfolio.
The undisputed global leader when it comes to identity security, CyberArk (CYBR), has been gaining attention on Wall Street. The stock is up 10% this week and could continue to gain steam ahead of the company’s earnings release, slated for next Wednesday. Regardless of any short-term earnings volatility, the potential for long-term, steady growth is too great to ignore.
CyberArk’s innovations occur across its self-hosted solutions and expanding SaaS portfolio of privileged access management, secrets management, and cloud privilege security offerings, helping its customers enable “Zero Trust” by enforcing least privilege. Under the framework of its Zero Trust approach, its teams can focus on identifying, isolating, and stopping threats from compromising identities and gaining privilege before they can do harm.
The Israel-based company was recently named a leader in the Gartner Magic Quadrant for Privileged Access Management for 2021. It was positioned both highest in the ability to execute and furthest in the completeness of vision for the fourth time in a row. It comes as no surprise the business has been attracting customers to its subscription-based services, which means tremendously reliable cash flow, a good sign for anyone eyeing the small-cap.
For its second quarter, CyberArk reported a 133% growth acceleration from the previous year’s quarter of the subscription portion of its annual recurring revenue (ARR) to $255 million. Total ARR came in at $465 million, with growth Accelerating to 48%. Management also increased the 2022 ARR Guidance Range to $589-$601 million, up from a prior estimate of $583.5-$598.5 million.
According to Mordor Intelligence, the application delivery controller market is expected to reach a valuation of $3.78 billion by 2026, representing a CAGR of 9.63% from 2021. One of the companies set to benefit most from the trend is A10 Networks (ATEN). Specialists in the manufacturing of application delivery controllers, A10 leverages artificial intelligence protocols to provide automated protection against distributed denial-of-service (DDoS) attacks, which are increasing in relevance by the day.
Widening profit margins surfaced in the most recent quarterly results as earnings expanded faster than revenues. Second quarter earnings came in at $0.17 per share, indicating an increase of 31% year-over-year, surpassing analyst estimates by 6%. Revenues were also upbeat at $68 million, representing a 15% increase from the same period last year and surpassing analyst expectations of $67.4 million.
“Our targeted, strategic investments in technology are enabling us to capture market share, while our diversity of revenue and cybersecurity solutions serve as catalysts for durable growth, even amidst macroeconomic conditions,” said Dhrupad Trivedi, A10 CEO.
The drastic earnings growth indicates the business is going from strength to strength. A trend that investors hope will continue well into the future. Management reiterated its full-year top-line growth target of 10 – 12% and expanded EBITDA in the range of 26 – 28% of revenue. A10 Networks certainly ticks a few desirable boxes and seems well worth watching.
Read Next: Diversification is for dummies
Market Wizard Larry Benedict is one of the most successful investors you’ll ever meet…
But he doesn’t invest in a traditional way.
His approach has nothing to do with “buy and hold.” And it flies in the face of everything a financial planner would ever tell you.
