[Editor’s note: This story was originally published in Novemeber.]
The future of technology is all about connecting devices to enhance the user experience. That’s why the Internet of Things (IoT) is one of the most exciting growth trends out there. I am sure you have heard all about IoT over the last few years. As much as I love the trend and believe it will grow by multiples in the years ahead, there is one problem — the need for security, and cybersecurity stocks.
The rate at which the world is becoming connected is growing faster than we can secure it. Consider that there are already over 20 billion connected devices around the globe. By 2020, there will be at least seven connected devices for every human on earth. That equates to over 50 billion internet-connected devices in the world. This mass connectivity is what makes up the IoT.
There is no question that all of this will make your life easier. But it also opens up a huge security risk. Just one hack into any connected device could spread like wildfire through the network of other devices. The result could range from small inconveniences to serious financial calamities and even physical injuries.
With hundreds of billions of new devices hitting the market every day, it is impossible that they will automatically have the required security. That would assume they are all created equal and that consumers will put in the proper protection to make them more difficult to hack.
Unfortunately, that simply will not happen. That’s why cybersecurity is a huge need that will become even more critical in the years ahead.
There are many companies involved in this trend, but as with any growing theme there are only a few that stand out as current leaders. I want to highlight three cybersecurity stocks today.
CyberArk Software (CYBR)
CyberArk is an Israeli firm that develops and sells software-based security solutions. It is a global leader in the space, with its more than 4,200 clients encompassing 50% of the Fortune 500 and over 30% of the Global 2000.
The company has grown rapidly in recent years. Revenue increased from $103 million in 2014 to $262 million in 2017. And that figure is anticipated to hit nearly $400 million by 2019.
While the top line has exploded, earnings have picked up as well. CYBR earned $1.16 a share last year and by 2022 it should earn close to $4 a share.
The stock has spent most of this year in a strong uptrend. The rally has stalled a bit recently, but with the underlying fundamentals still strong, I expect CYBR to remain a leading cybersecurity play for the foreseeable future.
This company, based in the United States, is a software-as-a-service (SaaS) provider of cybersecurity solutions. Its products scan emails, social media accounts, mobile apps, and more and stop 99% of attachment-based attacks.
Proofpoint is experiencing strong revenue growth, with the top line jumping from $196 million in 2014 to $515 million last year. That number is expected to increase to $876 million next year.
The company turned its first annual profit in 2016 when it earned 37 cents a share. That number is estimated to grow to $1.31 a share this year, and by 2021 analysts are looking for the bottom line to hit $3.45 a share.
The cybersecurity stock’s rally stalled in May after hitting an all-time high above $130, and it has trended lower in recent months. PFPT bounced off a low near $75 in late October, so now is a great time to buy in ahead of its next uptrend.
With a market cap of just $1.5 billion, Rapid7 is the smallest of the three cybersecurity companies we’re talking about today. RPD delivers the visibility, analytics and automation required to monitor and resolve cyber attacks. Its 7,200+ customers are located across 120 countries and include 55% of the Fortune 100.
This is yet another company that has seen huge growth in revenue in recent years. Its top line increased from $77 million in 2014 to $201 million last year. And Wall Street expects another 50% increase to $291 million by 2019.
While RPD has yet to turn a profit, I believe a breakeven result is achievable in 2019. By 2020, earnings should come in around 35 cents a share.
Once a company turns profitable, that is often followed by a few years of big bottom-line growth. With Rapid7 on the cusp of profitability, I suspect it’s only a matter of time before its shares start pricing in that upside.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.
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