Revisiting Bullish Cybersecurity Picks As Russia Bares Its Claws

In July 2020, I wrote a piece on cybersecurity stocks after yet another cybersecurity attack by China and Russia. In that article, I picked some of the stocks in that space poised for liftoff. I will not go through the tedious process of telling you where these stocks were and compared to where they are now for two reasons: One, it makes for a boring self- congratulatory read; and two, like an idiot I sold some of my positions to make options trades to varying degrees of success—and that’s generously put.

It is clear, however, that these stocks, while they bounced up and down, are far and away higher than they were for the most part. And, considering an even more emboldened and aggressive Russia, cyberattacks—and the market for cybersecurity—is only going to increase over time. According to Global Market Insights, the cybersecurity industry will grow at an average of 12% per year. The sector could reach $400 billion by 2026. The stay-at-home economy (now here to stay at least in part even after the Covid ship has sailed) has rapidly pushed development in this space; fears over Chinese and Russian cybercriminals scouring for our data will only serve to push these stocks even broadly representing this space higher.

Long-Term Portfolio Security in Cybersecurity

The stocks in this space that were in my radar back in the summer of 2020 were: Okta inc. OKTA; Zscaler Inc. ZS; CrowdStrike Holdings CRWD; Proofpoint Inc. (PFPT); Cisco Systems, Inc. CSCO; Palo Alto Networks Inc. PANW; and Fortinet Inc. FTNT. Of these, I am long on them all—save Proofpoint which went private last year in a $12.3 billion all-cash transaction with private equity firm Thoma Bravo. Considering how the market is acting this year, I say Bravo to them. But as the overall market continues to struggle—and while more lows even in this long-term winning space may be imminent, in the shorter-term look to Palo Alto Networks before its earnings release next week.

According to the Zachs Consensus Estimate, Palo Alto is expected to post quarterly earnings of $1.65 per share in its upcoming report, which represents a year-over-year change of +6.5%. Revenues are expected to be $1.28 billion, up 25.9% from the year- ago quarter. If they miss, the stock goes down; if they hit or exceed, it will go up. Investors looking to hope to see some green on their screens might want to buy in so long as they are willing to hold this long-term winner should the earnings play fail. A Promising 2022 Play One stock, Tenable (TENB) might show the most movement. A leader in threat detection and vulnerability management, the new Wall Street darling’s management tool Nessus serves 30,000 organizations and over 2 million individual downloads. This company’s stellar 2021 might be bested this year should the company turn profitable at what some analysts believe will be at 17 cents earnings per share. But, while this may be a space I have called well, you do not have to take my word for it. The 10 analysts who cover the company set a buy rating. The consensus is $65 per share; Piper Sandler is even more bullish at $72 per share. The stock currently trades as of midday Wednesday at $49.62 per share. Whether TENB will be the next best thing in cybersecurity stock picking is yet to be known. But if you decide to buy anything but gold during this untenable market situation, this stock—cybersecurity in general—might be a secure bet.