Home Business Insights & Advice Three cybersecurity stocks that could outperform the market in 2022

Three cybersecurity stocks that could outperform the market in 2022

by John Saunders
8th Apr 22 3:49 pm

The Covid-19 pandemic and geopolitical tensions in Eastern Europe have dramatically impacted the lives of many of us who have since moved into remote working environments. As a result, it’s never been more important to embrace cyber security as a means of nullifying the severity of new and stronger cyber threats.

As talk of the metaverse intensifies, tensions in geopolitics and the frequency of cyber attacks means that there’s never been a greater emphasis on how businesses are intent on limiting the disruption caused by cyber criminals.

In this article, Maxim Manturov, head of investment advice at Freedom Finance Europe (Freedom Holding Corp. (Nasdaq: FRHC), shares his opinions on the industry as well as three stocks that may outperform their benchmarks over the coming months and years:

Remote work in hyper-secure networks

In the wake of the pandemic, enterprise security largely revolves around remote access and the protection of cloud resources as more applications migrate to the cloud at a rapid pace. To make this possible, businesses must deploy Software-Defined Wide Area Networks (SD-WAN),  Secure Access Service Edge (SASE), and Zero-Trust Network Access (ZTNA).

SD-WANs are vital to the intelligent management of traffic that’s transferred throughout an organization. These networks are characterised by a single control and monitoring point throughout the entire network. This means that SD-WANs allow a range of devices to be configured to the infrastructure at a relatively low operating cost.

SASE technology combines network and security functions alongside WAN capabilities. To meet network requirements, it’s essential that SASE enterprise technology remains both reliable and secure.

Finally, ZTNA refers to an IT solution that offers secure remote access to valid company applications, data, and services based on clearly defined access control policies. The difference between ZTNA and Virtual Private Networks (VPNs) is that access can only be granted to specific services or applications – rather than the network as a whole.

(Image: Check Point)

As the role of cyber security today becomes more imperative amidst growing instances of attacks each week, more companies are having to face up to cyber crime. This, in turn, has delivered a greater level of emphasis on the firms that are intent on fighting cyber crime.

As a result, certain cyber security stocks may present themselves as strong investment opportunities for retail investors looking to explore industries that are set to grow in response to digital transformation and the recent geopolitical events emanating from Russia.

With this in mind, let’s take a deeper look at three stocks that may be well-positioned to outperform the general markets in 2022:

1. Salesforce (NYSE: CRM)

Salesforce is a cloud platform that enables users to create and deploy bespoke solutions, automate their business processes, and integrate their external applications.

Many of the world’s companies have used Salesforce services in recent years, including globally renowned brands like Adidas, Canon, Toyota, Western Union, Cisco, and many more. Salesforce has partnerships with many IT firms and provides out-of-the-box solutions for their client base.

In terms of performance, Salesforce’s revenue and gross profits have been growing at a steady pace, indicating that the company is using more production capacity whilst delivering more goods and services annually.

Perhaps the most significant metric for investors to take note of is the company’s net income. In 2020, Salesforce’s net income grew by a massive 3,100% year-on-year, which is likely due to the company’s assets increasing upon an independent auditor’s valuation.

Although such a huge increase in income is a great sign of growth, it’s important to avoid dwelling on these figures alone. However, the company’s operating profit is gradually showing growth, which makes a $170 buy zone for shares a good opportunity for investors.

2. Tenable Holdings (NASDAQ: TENB)

Tenable Holdings Inc. is an American technology firm that develops and provides software for Cyber Exposure, which is one of the newest emerging facets of cyber security.

The company offers solutions that can provide capabilities to identify issues like misconfiguration, internal and regulatory compliance breaches, and other prospective security issues within IT infrastructures. The company can also deliver actionable analytics that helps clients to limit the cyber risks they’re exposed to.

Revenue and profit margins are continuing to grow year on year for Tenable Holdings, and the stock itself has grown some 50% over the past 12 months alone. However, at present, the company’s operating income and net profit are still not growing.

This is likely to be down to the money flowing into the company being reallocated into discovering new products and working on fresh solutions. This means that Tenable Holdings is currently making a loss, and only in the coming years will it begin to turn a profit.

However, as loss within the company has dropped by some 111% over the past three years, there appears to be a solid platform that the company is building from. With this in mind, investors may be able to seek out further profits should TENB reach $42.50 per share.

3. Fortinet (NASDAQ: FTNT)

Fortinet is a US-based multinational corporation that offers security solution to some of the largest enterprises in the world, as well as major service providers and governmental bodies.

The company provides intuitive levels of protection for its clients in the face of cyber attacks, as well as the ability to meet the ever-growing necessity of borderless network performance.

So, let’s take a deeper look into Fortinet’s fundamentals: The company is stable, and in spite of the disruption caused by Covid-19, the company has actually shown positive growth throughout all four of its financial indicators. Furthermore, we can see evidence of rapid growth and operating income. This indicates that the company is earning more money from its operating activities each year. For instance, in 2021, Fortinet’s earnings totalled $646 million – growing by 31% year-on-year.

This makes Fortinet an attractive proposition for investors to track, however, it may not be recommendable to buy shares in the company at its current price. Instead, it may be worth looking to buy shares at a small percentage of the deposit starting at around $230, and to average out on any future declines in value.

The three companies highlighted have made some strong moves in some fairly influential positions in cybersecurity over the past year. With modern geopolitical tensions spilling into online security, and the upcoming emergence of metaverse technology, cybersecurity today will likely be part of a growing level of demand over time. With this in mind, its relevance to new technology makes it very much worth investors considering buying into cybersecurity stocks.

 

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