Table of Contents
Introduction
Cybersecurity has become increasingly important in recent years, especially with the rise of cloud computing and remote work. The COVID-19 pandemic has further accelerated the need for strong cybersecurity measures, as organizations face new security challenges. As a result, cybersecurity spending has soared, and many cybersecurity stocks have performed exceptionally well in 2020 and 2021. Although a bear market in 2022 affected some of these stocks, cybersecurity remains a top investment theme for 2023 and beyond.
Why Invest in Cybersecurity Stocks?
The number of data breaches has been on the rise, reaching a new record in 2021. Global spending on cybersecurity is expected to exceed $200 billion in 2023, indicating the high-growth potential of this industry. Investing in cybersecurity stocks allows you to capitalize on this growing demand for next-gen security software.
Top Cybersecurity Stocks in 2023
Here are some of the top cybersecurity stocks to consider for investment in 2023 and beyond:
1. CrowdStrike Holdings (NASDAQ:CRWD)
- Market Capitalization: $36.42 billion
- Description: One of the largest pure-play cybersecurity companies, specializing in endpoint security software.
2. Zscaler (NASDAQ:ZS)
- Market Capitalization: $22.24 billion
- Description: Cloud computing and internet security software provider.
3. Okta (NASDAQ:OKTA)
- Market Capitalization: $11.78 billion
- Description: Cloud-based identity and access management company.
4. SentinelOne (NYSE:S)
- Market Capitalization: $4.045 billion
- Description: Recent IPO and a competitor of CrowdStrike.
5. Palo Alto Networks (NYSE:PANW)
- Market Capitalization: $69.09 billion
- Description: Largest independent cybersecurity company, specializing in firewalls and cloud security.
6. Fortinet (NASDAQ:FTNT)
- Market Capitalization: $54.63 billion
- Description: Large security company known for its best-in-class hardware for data center security.
7. Splunk (NASDAQ:SPLK)
- Market Capitalization: $17.08 billion
- Description: Leader in data analytics, offering functions like cloud observability and security orchestration.
8. Datadog (NASDAQ:DDOG)
- Market Capitalization: $32.94 billion
- Description: Competitor of Splunk, specializing in data analytics and security monitoring capabilities.
9. Akamai (NASDAQ:AKAM)
- Market Capitalization: $14.22 billion
- Description: One of the largest internet infrastructure companies that helps secure web content.
Cloud Security, Identity Management, and Legacy Security Vendors
Cloud-native cybersecurity companies that specialize in cloud security and identity management are well-positioned for future growth. Here are some top names to consider in this space:
1. CrowdStrike Holdings
CrowdStrike Holdings provides cloud-based endpoint security software, making it well-suited for supporting remote work. The company uses machine learning to detect security breaches and has been steadily increasing the number of modules on its platform. Despite a decline in stock price in 2022, CrowdStrike’s sales have been booming, and it remains highly profitable.
2. Zscaler
Zscaler works in tandem with endpoint security services to help keep data secure. The company has been rapidly increasing its sales and offers internet security and end-user monitoring products. With the expected growth in cloud computing, Zscaler is well-positioned to profit from this trend.
3. Okta
Okta is a pioneer in identity and access management, using zero-trust architecture to constantly verify user access. In an increasingly mobile and cloud-based world, Okta’s identity management software has been in high demand. Despite a decline in stock price due to a cyberattack, Okta remains in growth mode as new customers adopt its software.
4. SentinelOne
SentinelOne is a recent IPO in the cybersecurity industry and offers a cloud-based endpoint security platform. The company has experienced rapid sales growth and is expected to continue this trend in 2023. Its ability to automatically detect and resolve cybersecurity threats is being well-received in the market.
5. Palo Alto Networks
Palo Alto Networks specializes in firewalls and has a strong presence in the legacy security market. The company has also made acquisitions to expand its cloud security offerings and is predicting double-digit percentage revenue growth in the coming years. Palo Alto Networks is the largest independent cybersecurity company and offers relative value compared to its cloud-native rivals.
6. Fortinet
Fortinet is another legacy security software provider and is one of the largest cybersecurity companies in the world. The company has maintained double-digit percentage growth and profitability and has invested in organic development of cloud security. Fortinet’s best-in-class hardware generates significant revenue, and the company is also exploring partnerships to develop next-gen security for quantum computing.
Infrastructure Monitoring and Content Delivery Networks
As cloud computing and data usage continue to increase, companies that monitor cloud-based operations and manage web content are crucial for cybersecurity. Here are some top names in this space:
1. Splunk
Splunk is a leader in data analytics and offers software that helps companies monitor digital activity and orchestrate responses to data breaches. Although its platform predates cloud technology, Splunk has been migrating customers to cloud-based versions of its software. The company expects double-digit revenue growth in the coming years.
2. Datadog
Datadog is a cloud-native platform that collects and monitors cloud-based data and operations. The company uses AI to automate data monitoring and has expanded its platform’s capabilities to include cloud-based security and data monitoring. With the growing demand for data analytics software, Datadog is well-positioned for future growth.
3. Akamai
As a content delivery network (CDN), Akamai ensures secure data transmission across the internet. With the increasing amount of data traveling online, CDNs are becoming more important. Akamai has also made acquisitions to bolster its network security offerings and protect customers from ransomware attacks. The company is a leader in CDN services and edge computing technology.
Top Cybersecurity ETFs in 2023
If you prefer to invest in cybersecurity as a whole rather than individual stocks, there are several ETFs available. Here are some top cybersecurity ETFs to consider:
1. First Trust NASDAQ CEA Cybersecurity ETF (CIBR)
With $4.8 billion in assets under management, this ETF is the largest in the cybersecurity industry. It consists of 35 stocks and has an affordable expense ratio of 0.6%.
2. ETFMG Prime Cyber Security ETF (HACK)
This ETF holds 57 stocks in the cybersecurity industry, including many smaller companies. It manages $1.4 billion of assets and has an expense ratio of 0.6%.
3. Global X Cybersecurity ETF (BUG)
Launched in 2019, this ETF manages $727 million of assets and holds 23 stocks in its portfolio. It has an expense ratio of 0.51% and has outperformed its competitors since its inception.
Conclusion
Investing in cybersecurity stocks provides an opportunity to capitalize on the growing demand for next-gen security software. Cloud-native companies and those specializing in cloud security and identity management are particularly well-positioned for future growth. Additionally, companies that monitor cloud-based operations and manage web content play a crucial role in ensuring cybersecurity. Consider investing in individual cybersecurity stocks or cybersecurity ETFs to participate in this high-growth industry. Remember to focus on the long-term potential of these companies, as individual stock prices can be volatile. With the rapid evolution and proliferation of cybersecurity technology, companies in this sector are poised for financial success.
**Note: The content provided in this article is for informational purposes only and should not be considered financial or investment advice. Always do your own due diligence before making any investment decisions.
