The 3 Best Cybersecurity Stocks to Buy Now: September 2023
Regarding cybersecurity, the rapid proliferation of artificial intelligence produces great risks and tremendous opportunities. Among the risks are “data poisoning,” which involves hackers corrupting the data used to train AI systems, and the theft by hackers of “AI models.” By stealing the models, the hackers can replicate the systems’ behavior and carry out harmful activities. But luckily, AI can also be used to strengthen cybersecurity. For example, AI can automatically determine which IP addresses are malicious and quickly take the appropriate actions to neutralize dangerous ones.
Further, when combined with more traditional techniques, AI can correctly identify 100% of all true cybersecurity threats while producing a relatively low false positive rate. Given these points, I believe many companies will increase their utilization of cybersecurity tools. Here are the three best cybersecurity stocks to buy for those who want to exploit the latter trend.
Cybersecurity Stocks: Palo Alto (PANW)
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In the wake of Palo Alto’s (NASDAQ:PANW) recent second-quarter earnings report, two banks’ analysts were very upbeat on the company’s outlook. According to Wells Fargo analyst Andrew Nowinski, PANW “explained how AI is transforming the security market, and how Palo Alto will leverage its platform to ultimately provide real-time security outcomes for customers.” Moreover, the analyst stated that Palo Alto’s “new medium-term targets…were actually all better than expected,” He raised his price target on the shares to $270 from $265.
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Evercore ISI analyst Peter Levine increased his price target on PANW to $295 from $240 after the company unveiled its results, saying, “It’s clear investors will continue to reward those that can deliver profitable growth, operating leverage, and greater cash flow generation in this market,” Levine maintained an “overweight” rating on the shares.
Reviewers on the IT research firm Gartner website give Palo Alto a strong overall average rating of 4.6 stars, with 97% of them grading the firm with either four or five stars.
CyberArk (CYBR)
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Israel-based CyberArk (NASDAQ:CYBR) specializes in providing privilege access management, which “protects organizations from cyber-attacks by protecting unauthorized individuals’ access to critical resources of any given company,” according to Seeking Alpha columnist Tech Stock Pros.
A massive amount of data will be accessible to companies’ employees during the current era, which features both the Internet of Things and AI. As a result, privilege access management will be tremendously important in the medium and long term, making the demand for CYBR’s offerings quite strong in those periods.
And that trend is already playing out, as the company’s subscription annual recurring revenue soared 77% in Q2 versus the previous quarter.
Reviewers on the IT research firm Gartner website give Palo Alto a strong overall average rating of 4.6 stars, with 96% of them giving the firm either four stars or five stars.
Check Point (CHKP)
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For many years, Check Point (NASDAQ:CHKP) has been trapped in a trading range, repeatedly failing to rise about $135 except for a brief period in early 2022.
However, I believe CHKP will likely break out of the range soon. The Street is looking for relatively safe technology names trading at low valuations while also growing significantly. (The famous permabear Mike Wilson, a Morgan Stanley analyst, recently called on investors to buy “defensive growth stocks.”)
Check Point fits the bill, as its forward price-earnings ratio is a low 15.2x, but analysts, on average, expect its earnings per share to come in at $8.90 next year, up from $7.40 in 2022.
Moreover, as I pointed out in a previous column, Check Point extensively uses AI. In fact, in the beginning of 2023, it unveiled Horizon XDR/XPR. According to the company, the system is “an industry-first, AI powered, extended detection, protection, and response framework meant to handle complex attacks on all fronts.”
And finally, in Q2, the company’s earnings per share jumped 22% year-over-year, while its security subscription revenues, derived from its more “advanced” offerings, climbed 14% YOY.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
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