An Introduction
Recent data by Check Point Software Technologies reveals that cyberattacks have skyrocketed climbing 75% globally year-over-year and are up 56% in the U.S. from 2023 levels and, given that fact, according to research company, Gartner, corporate spending on cyber security should grow at a CAGR of 13.8% between now and 2030 (source).
Cyber crime damage is reported (see here) to reach $10.3 trillion by next year making the need for sophisticated cyber security crucial to protect networks, systems and other digital infrastructure from malicious cyber attacks (see here). On the other hand, however, it is estimated that cyber security spending was only $188B in 2023.
As businesses, governments and individuals race to protect themselves from these threats, the need for robust cybersecurity will only increase and this means that companies developing cutting-edge technology to secure networks and data could be positioned for explosive growth suggesting that many cybersecurity software companies should be excellent long-term buys.
Why Is Ai the Perfect Technology For Cyber Security?
AI makes it a perfect value-addition technology for cyber security because it is fundamentally a complex mathematical equation that generates outputs with new data by using existing data. That enables cyber security companies to train their models with data from previous attacks to create autonomous systems that can detect if an attack is ongoing based on certain readings. This allows companies and users to increase their lead times in dealing with attacks and allows them to prepare mitigation and response strategies quickly.
What Are Cyber Security Software Companies?
Cyber security companies train their models with data from previous attacks to create autonomous systems that can detect if an attack is ongoing based on certain readings. As a result that increases companies’ lead time for an attack and allows them to prepare mitigation and response strategies. Video: How AI is changing the cybersecurity landscape.
The MunAiMarkets Pure-Play CyberSecurity Software Stocks Portfolio
eSecutityPlanet.com provides a list of cyber security companies (see here) of which the 5 largest of those companies (i.e. +$20B market capitalization) are highlighted in the MunAiMarkets Pure-Play CyberSecurity Software Stocks Portfolio which conveys how the constituents performed in November along with their market capitalizations and forward price/earnings (P/E) ratios and price/earnings-to growth (PEG) ratios.
What Is the PEG Ratio?
Given that growth is a key component of a stock’s expected return, the PEG ratio provides a simple way for investors to see how cheap a stock is relative to its growth rate and to compare a stock to its competitors.
The PEG ratio (price/earnings-to-growth ratio) builds upon the price-to-earnings (P/E) ratio by factoring in expected earnings growth. It takes into account not just the current earnings but also the company’s growth prospects. It is a quick calculation used to determine if a stock is trading at, above, or below fair value.
- A PEG ratio below 1.0 suggests that the stock price is undervalued relative to its expected future earnings growth. In other words, the market may not fully account for the company’s growth potential.
- Conversely, PEG ratios above 1.0 indicate that the stock price might be overvalued, as it isn’t necessarily supported by growth forecasts.
- Look for stocks with a PEG ratio below the industry median.
- The PEG ratio should be used along with the balance sheet, debt burden, and cash flow, or other valuation metrics that use the income statement. It’s also important to understand things like a company’s competitive advantage, its addressable market, and its long-term growth prospects.
- It’s a convenient rule of thumb but remember that the PEG ratio can vary based on earnings growth forecasts and the time frame being considered.
Below are how the constituents performed in November, in descending order, along with their market capitalizations and current price/earnings (P/E) ratios, price/earnings-to growth (PEG) ratios and the reasons behind their price changes.
- Fortinet (FTNT): UP 20.6% in November
- Market Capitalization: $75.3B
- P/E Ratio: 49.3
- PEG Ratio: 2.4
- Reasons for Price Change:
- Positive Analyst Ratings: Several analysts upgraded their ratings and price targets for FTNT, citing strong growth prospects and upcoming catalysts.
- Strong Earnings Report: Fortinet reported earnings that exceeded analyst expectations, boosting investor confidence.
- Strategic Initiatives: Fortinet announced new strategic initiatives and partnerships, which are expected to drive growth and innovation.
- Market Sentiment: Overall market sentiment towards cybersecurity companies improved, contributing to the rise in FTNT’s stock price
- CrowdStrike Holdings (CRWD): UP 16.4% in November
- Market Capitalization: $89.7B
- P/E Ratio: 719.6 (that is not a misprint!)
- PEG Ratio: 2.6
- Reasons for Price Change:
- Strong Earnings Report: CrowdStrike reported earnings that exceeded analyst expectations, boosting investor confidence.
- Positive Market Sentiment: The overall market sentiment towards cybersecurity companies improved, contributing to the rise in CRWD’s stock price.
- Strategic Initiatives: CrowdStrike announced new strategic initiatives and partnerships, which are expected to drive growth and innovation.
- Analyst Upgrades: Several analysts upgraded their ratings and price targets for CRWD, citing the company’s strong growth prospects and upcoming catalysts
- Zscaler (ZS): UP 14.3% in November
- Market Capitalization: $31.7B
- P/E Ratio: Not Applicable
- PEG Ratio: 2.3
- Reasons for Price Change:
- Strong Earnings Report: Zscaler reported earnings that exceeded analyst expectations, boosting investor confidence.
- Positive Market Sentiment: The overall market sentiment towards cybersecurity companies improved, contributing to the rise in ZS’s stock price.
- Strategic Initiatives: Zscaler announced new strategic initiatives and partnerships, which are expected to drive growth and innovation.
- Analyst Upgrades: Several analysts upgraded their ratings and price targets for ZS, citing the company’s strong growth prospects and upcoming catalysts
- Palo Alto Networks (PANW): UP 7.6% in November
- Market Capitalization: $132.7B
- P/E Ratio: 52.6
- PEG Ratio: 2.8
- Reasons for Price Change:
- Strong Earnings Report: Palo Alto Networks reported impressive fiscal Q1 results, with non-GAAP earnings of $1.56 per share, exceeding analyst expectations.
- Positive Market Sentiment: The overall market sentiment towards cybersecurity companies improved, contributing to the rise in PANW’s stock price.
- Strategic Initiatives: Palo Alto Networks announced new strategic initiatives and partnerships, which are expected to drive growth and innovation.
- Stock Split Announcement: The company announced a 2-for-1 stock split, which is set to take place in December 2024. This move often attracts new investors and boosts investor confidence.
- Check Point Software Technologies (CHKP): UP 5.0% in November
- Market Capitalization: $20.9B
- P/E Ratio: 25.6
- PEG Ratio: 3.3
- Reasons for Price Change:
- Positive Analyst Ratings: Several analysts upgraded their ratings and price targets for CHKP, citing strong growth prospects and upcoming catalysts.
- Strong Earnings Report: Check Point reported earnings that met analyst expectations, boosting investor confidence.
- Strategic Initiatives: Check Point announced new strategic initiatives and partnerships, which are expected to drive growth and innovation.
- Market Sentiment: Overall market sentiment towards cybersecurity companies improved, contributing to the rise in CHKP’s stock price.
Summary
On average, the above 5 pure-play cybersecurity software stocks, with an average market capitalization of $70B, went UP 11.6% in November and are now UP 27.7% YTD.
