11 Most Undervalued Cybersecurity Stocks To Buy According To Analysts
In this piece, we will take a look at the 11 most undervalued cybersecurity stocks to buy according to analysts. If you want to skip our overview of cybersecurity stocks and the industry, then you can skip ahead to the 5 Most Undervalued Cybersecurity Stocks To Buy According To Analysts.
While most attention this year has focused on artificial intelligence, space exploration, or weight loss drugs, quietly in the background, one sector has reminded everyone once again that it is just as important as any other industry. This sector is none other than cybersecurity, and as we settle into 2024, a war of sorts has broken out in the digital world.
If you've been unfortunate enough to have dealt with the healthcare system over the past month, then it's possible that you faced a disruption on the insurance front. If so, then this was because the systems of UnitedHealth Group Incorporated (NYSE:UNH)'s business division Change Healthcare were hacked, which led to a suspension of insurance claims processing at pharmacies across several areas. Immediately after the attack, reports surfaced that the ransomware group BlackHat might be responsible, as it had vowed to target healthcare facilities after the U.S. Justice Department had shared in December 2023 that it had conducted a massive operation against the group to seize its digital assets and other tools. It later turned out that the suspicions were correct, with UnitedHealth's vice president confirming the fact in a statement given to TechCrunch.
Since the hack led to pharmacies and hospitals being unable to process payments, it resulted in a cash shortage as healthcare providers were unable to make their payments on time but had to provide services to patients and customers at the same time. However, despite its scale, the ransomware attack isn't the only cybersecurity threat that has been in the news lately. One of the biggest technology stocks and companies in the world, Microsoft Corporation (NASDAQ:MSFT) joined the choir in March 2024 when it shared that a Russian hacker gang's data breach in January that led to the leaking of data of Microsoft employees was being used for another cyberattack. While the Russian embassy in the U.S. does not respond to Microsoft's allegations, the firm is quite persistent with them, and the latest attack led cybersecurity professionals to worry that perhaps the hackers were trying to embed backdoors in Microsoft's software products.
Looking at these striking developments, one would wonder that perhaps investing in cybersecurity stocks is a sound decision. After all, the copious amounts of data generated and stored every day create incentives for nefarious actors to try their hand at quick riches, and in the process, it also generates demand for cybersecurity products. Companies that provide cybersecurity services, such as Gen Digital Inc. (NASDAQ:GEN) are typically classified as cybersecurity stocks, but due to the polar nature of the technology industry where giants like Microsoft dominate several industries, other firms such as Alphabet Inc. (NASDAQ:GOOG) are also key players in the industry. For those out of the loop, Alphabet's cybersecurity division Mandiant was at the center of efforts to determine the roots of UnitedHealth's ransomware attack, after Google bought the firm for a cool $5.4 billion in 2022.
So, as the thinking goes, since there are more cybersecurity threats, cybersecurity stocks are great to invest in as more global organizations look towards them to secure infrastructure and data worth billions of dollars. To check whether this hypothesis holds water, let's take a look at the performance of the S&P Kensho Cyber Security Index. The group of stocks that seek to provide digital security services to businesses is up by a respectable 35% over the past twelve months, a time period that has not only seen law enforcement fend off ransomware gangs but also a complicated global political landscape in which Chinese hackers like the uniquely named "Volt Typhoon" roam free. Year to date, the stock index's price appreciation dimmed down to 4.5%, as technology stocks experienced a broader lift on the back of investor hopes of interest rate cuts in 2024 despite inflation being higher than what the Federal Reserve's public statements would prefer.
In a world beset with physical and digital threats, it's also important to see what the smart money thinks when it comes to cybersecurity stocks. On this front, here is what Artisan Partners' fourth quarter of 2023 investor letter had to say about the cybersecurity firm CrowdStrike Holdings, Inc. (NASDAQ:CRWD):
Top-performing securities CrowdStrike Holdings, a security software provider, reported strong earnings results – driven by strength in cloud security and identity protection – with a better than expected profitability profile. Cyber threats remain elevated, and it is likely that the rise of artificial intelligence will make it easier for criminals to generate and scale more sophisticated attacks, which could increase the demand for CrowdStrike products in the years ahead.
With these details in mind, let's take a look at the most undervalued cybersecurity stocks according to analysts. A couple of names are Zscaler, Inc. (NASDAQ:ZS), Telos Corporation (NASDAQ:TLS), and Arqit Quantum Inc. (NASDAQ:ARQQ).
Photo by Obie Fernandez on Unsplash
Our Methodology
To make our list of the most undervalued cybersecurity stocks to buy according to analysts, we ranked the U.S. traded holdings of the Global X Cybersecurity ETF by their average analyst share price target percentage upside and picked out the top stocks.
For these undervalued cybersecurity stocks, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
11 Most Undervalued Cybersecurity Stocks To Buy According To Analysts
11. CyberArk Software Ltd. (NASDAQ:CYBR)
Number of Q4 2023 Hedge Fund Shareholders: 50
Average Analyst Share Price Target Upside: 14%
Average Analyst Share Price Target: $297
CyberArk Software Ltd. (NASDAQ:CYBR) is an Israeli software company headquartered in Petah Tikva, Israel. It enables firms to manage their employee' access to company servers. It marks a strong start to our list of the most undervalued cybersecurity stocks as the shares are rated Strong Buy on average.
As of Q4 2023 end, 50 out of the 933 hedge funds profiled by Insider Monkey had held a stake in CyberArk Software Ltd. (NASDAQ:CYBR). Robert G. Moses's RGM Capital was the firm's biggest shareholder due to its $221 million stake.
Telos Corporation (NASDAQ:TLS), Zscaler, Inc. (NASDAQ:ZS), and Arqit Quantum Inc. (NASDAQ:ARQQ) are met by CyberArk Software Ltd. (NASDAQ:CYBR) in our list of the most undervalued cybersecurity stocks according to analysts.
10. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Q4 2023 Hedge Fund Shareholders: 62
Average Analyst Share Price Target Upside: 15%
Average Analyst Share Price Target: $383
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is an American company headquartered in Austin, Texas. It enables organizations to monitor their systems for potential threats. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has been doing well on the financial front as of late since it has beaten analyst EPS estimates in all four of its latest quarters.
During 2023's December quarter, 62 out of the 933 hedge funds part of Insider Monkey's database had invested in the firm. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)'s largest hedge fund investor is Jim Simons's Renaissance Technologies as it owns $450 million worth of shares.
9. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Q4 2023 Hedge Fund Shareholders: 77
Average Analyst Share Price Target Upside: 15%
Average Analyst Share Price Target: $335
Palo Alto Networks, Inc. (NASDAQ:PANW) provides software platforms to enable companies and others to monitor and protect their networks. Its shares dropped in February 2024 after the firm shared that it now expects the low end of 2024 billings to sit at $10.1 billion, for a $600 million drop.
Insider Monkey dug through 933 hedge fund portfolios for their fourth quarter of 2023 shareholdings to find 77 Palo Alto Networks, Inc. (NASDAQ:PANW) investors. Alex Sacerdote's Whale Rock Capital Management owned the biggest stake which was worth $137 million.
8. Rapid7, Inc. (NASDAQ:RPD)
Number of Q4 2023 Hedge Fund Shareholders: 30
Average Analyst Share Price Target Upside: 17%
Average Analyst Share Price Target: $62
Rapid7, Inc. (NASDAQ:RPD) enables customers to monitor their cloud platforms, monitor them for threats, and run other operations. Like Palo Alto Networks, its shares also tumbled after the latest earnings release that came with weak revenue and billings guidance.
As of December 2023 end, 30 out of the 933 hedge funds tracked by Insider Monkey had bought the firm's shares. Rapid7, Inc. (NASDAQ:RPD)'s largest hedge fund investor is Steve Cohen's Point72 Asset Management as it owns $104 million worth of shares.
7. OneSpan Inc. (NASDAQ:OSPN)
Number of Q4 2023 Hedge Fund Shareholders: 17
Average Analyst Share Price Target Upside: 22%
Average Analyst Share Price Target: $12
OneSpan Inc. (NASDAQ:OSPN) is a small Massachusetts based firm that provides document authentication, digital passkeys, and other associated products and services. The firm's investors ended 2023 on a disappointing note after OneSpan Inc. (NASDAQ:OSPN) was removed from the S&P SmallCap 600 stock index.
Insider Monkey's fourth quarter of 2023 survey covering 933 hedge funds outlined that 17 were OneSpan Inc. (NASDAQ:OSPN)'s investors. Ted White and Christopher Kiper's Legion Partners Asset Management owned the biggest stake among these which was worth $32 million.
6. Gen Digital Inc. (NASDAQ:GEN)
Number of Q4 2023 Hedge Fund Shareholders: 36
Average Analyst Share Price Target Upside: 23%
Average Analyst Share Price Target: $27
Gen Digital Inc. (NASDAQ:GEN) is one of the best known cybersecurity stocks in the world due to its Norton antivirus and other products. Like several other cybersecurity stocks, the firm reduced its revenue guidance for 2024 during the latest earnings release, an event that sent the shares tumbling by 15%.
36 out of the 933 hedge funds part of Insider Monkey's Q4 2023 database had invested in the firm. Gen Digital Inc. (NASDAQ:GEN)'s largest hedge fund shareholder is Jeffrey Smith's Starboard Value LP through its $424 million investment.
Zscaler, Inc. (NASDAQ:ZS), Gen Digital Inc. (NASDAQ:GEN), Telos Corporation (NASDAQ:TLS), and Arqit Quantum Inc. (NASDAQ:ARQQ) are some undervalued cybersecurity stocks that hedge funds are buying.
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Disclosure. None. 11 Most Undervalued Cybersecurity Stocks To Buy According To Analysts was initially published on Insider Monkey.
