Cybersecurity is one of the leading sectors in the world today. Furthermore, the number of hacking and ransomware attacks has increased, and analysts expect this trend to continue.
A recent report found that the cybersecurity sector was worth more than $167 billion in 2020 and is set to reach more than $250 billion in 2023.
This trend will be driven by the number of people working from home and the increasing role of cryptocurrencies like Monero and Dash that cannot be tracked.
In this article, we will look at the types of cybersecurity stocks and some of the popular companies to trade.
Types of cybersecurity stocks
Cybersecurity is a relatively wide industry that encompasses so many details. As such, there are different types of companies in the sector. Some of these types are:
- Application security - These are firms that create software that prevent attacks in computers. The types of application security firms are antivirus, firewalls, and encryption. A good example of such stock is Avast, which is listed in London.
- Network security - These are cybersecurity companies that provide security to a company’s network. A good example of this is Okta. Okta provides solutions that facilitate identity management in a company.
- Cloud security - With more people and companies relying on cloud security, there are companies like CrowdStrike that provide solutions to protect them.
- Internet of Things (IoT) security - These are companies whose products are embedded in IoT products. A good example of this is Blackberry.
- Critical infrastructure security - These are firms that help to protect important infrastructure like the electricity grid.
- Identity theft security - This is a type of cybersecurity that helps people and companies prevent identity theft. A good example is Norton Lifelock.
Key data to watch in cybersecurity stocks
Traders and investors look at different things when trading in cybersecurity. Some of the most popular details are:
- Revenue and growth - In this, they look at how a company is growing compared to its peer companies. Ideally, participants focused on growth look at firms that are seeing higher revenue growth like Okta, Cloudflare, and CrowdStrike.
- Successes - Traders look at the success of companies in identifying and neutralizing an attack. This leads to more contracts from other companies.
- Number of companies - Traders look at the number of companies added as customers in a quarter. In this regard, they also look at a company’s churn.
- ARPU - This refers to the Average Revenue Per User and whether it is growing or slowing.
How to trade in cybersecurity
There are basically two main ways of trading in the growing cybersecurity sector. First, you can invest or trade in individual stocks like Cloudflare, Norton, and Fortinet, among others.
Alternatively, you could trade or invest in cybersecurity exchange-traded funds (ETFs). Some of these stocks are:
- First Trust Nasdaq Cybersecurity ETF (CIBR) - It has more than $4.17 billion in assets and is made up of companies like ZScaler, VeriSign, and Rapid7.
- Global X Cybersecurity ETF (BUG) - It has more than $569 million and has companies like Fortinet, Palo Alto Networks, and Check Point Software.
- ETFMG Prime Cyber Security ETF (HACK) - It has more than $2.13 billion in assets and has holdings like Qualys, Proofpoint, and SolarWinds.
Other popular cybersecurity ETFs are ProShares Ultra Nasdaq Cybersecurity and WisdomTree Cybersecurity Fund.
The best Cybersecurity stocks
There are hundreds of companies in the cybersecurity industry around the world. Let us look at some of the top cybersecurity stocks to trade or invest in today.
Palo Alto Networks (PANW)
Palo Alto Networks is a cybersecurity company with a market capitalization of more than $37 billion. The company provides several solutions that are intended to secure the enterprise, cloud, and the future.
Some of its products are Cortex XDR, CloudGenix, and WildFire. Some of its clients are companies like Experian, AutoNation, and Salesforce. Its revenue has jumped from more than $1.3 billion in 2016 to more than $3 billion in 2020.
Cloudflare is a cybersecurity company that went public in 2020 (some tips to trade IPOs). Its market capitalization has jumped to more than $33 billion.
While most people don’t know what Cloudflare is, many of them have used their services. The company provides DNS solutions that are used by most websites like DoorDash, LabCorp, IBM, LendingTree, and Zendesk. It has more than 25 million customers. Its total revenue has grown from $84 million in 2016 to more than $431 million in 2021.
Fastly is a relatively small company with a market cap of around $6.2 billion. Yet it is one of the most essential companies in the world. Indeed, an outage in the company’s solutions led to a major outage that affected most companies like New York Times, Guardian, and Uber.
The firm’s key product is Content Delivery Network (CDN) that helps websites become faster. It also helps prevent DDOS attacks. It has increased its revenue from more than $104 million in 2017 to more than $290 million in 2020.
ZScaler is a $31 billion cybersecurity company that helps companies like Johnson Controls, AutoNation, Siemens, and Schneider Electric stay safe. The firm’s key product is the ZScaler Zero Trust Exchange, which helps to secure access to the internet and internal applications and ensure workload segmentation.
The company handles more than 100 billion requests every day. Its revenue has increased from $80 billion in 2016 to more than $431 million in 2020.
Okta is a $35 billion cybersecurity company that is in the identity management subcategory. The firm provides its services to more than 10,000 companies globally. Some of its customers are companies like Gitlab, Hitachi, CarMax, and Takeda.
It has grown its revenue from more than $160 million in 2016 to more than $835 million. This trend will likely continue helped by the firm’s recent acquisitions.
There are other quality cybersecurity stocks that we have not mentioned. Some of them are Fortinet, Splunk. Rapid7, and VMWare, among others.
External Useful Resources
- Cyber Security Services Market Size Worth $192.70 Billion By 2028 - PRNewswire