3 Cybersecurity Stocks You Can Buy and Hold for the Next Decade
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Cybersecurity stocks have not been immune from the recent market sell-off, opening up some attractive entry points for some of the top companies in the space. Meanwhile, cyberattacks are not going away and are becoming more frequent and sophisticated. As such, these are the types of stocks you can buy and hold for a long time.
Let’s look at three cybersecurity stocks you might want to buy now and hold for the long term.
While known for its next-generation firewalls, Palo Alto Networks(NASDAQ: PANW) has transformed itself into more of a complete cybersecurity company.
Seeing customers become frustrated using disparate point cybersecurity solutions, the company made a bold move last year when it introduced a new “platformization” strategy. Under this strategy, it stopped selling new point solutions and began consolidating customers onto one of its three main cybersecurity platforms.
To incentivize customers to do this, it decided to let customers use some of its services for free while they had contracts in place with other cybersecurity companies for similar services. At the time, it said this was the equivalent of giving customers about six months of free product capabilities.
The strategy thus far appears to be working. It ended last quarter with 1,150 platformizations within its top 5,000 customers, most of which are on its network security platform. It also noted that customers using two of its platforms increased by 50%, while it tripled the number of customers using all three of its platforms. Its two newer platforms are its comprehensive threat detection and response solution Cortex and cloud security solution Prisma Cloud. Its goal is to have between 2,500 and 3,500 platformization customers by fiscal year 2030.
Overall, Palo Alto’s platformization strategy is the right one and should help power the stock over the long run.
Image source: Getty Images.
CrowdStrike(NASDAQ: CRWD) is the leader in endpoint security with its Falcon platform. Endpoint security protects devices connected to a network — such as smartphones, laptops, and servers — from malicious attacks.
The company benefits from the trend in the space of organizations looking to consolidate their cybersecurity onto a single platform with one vendor. This leads customers to continue to adopt more of its modules. In fact, 67% of CrowdStrike’s customers deploy five or more of its modules, while 21% use eight or more.
Customers are also drawn to the company’s Falcon Flex solution, which is a flexible licensing and procurement model that makes it easier to have access to CrowdStrike’s full cybersecurity portfolio. With Falcon Flex, customers can quickly deploy the CrowdStrike solution they need when needed. This gives customers greater flexibility when dealing with cybersecurity threats while allowing them to better manage their cybersecurity spending.
While CrowdStrike saw its revenue growth slow following a well-publicized outage last year, customer retention remains solid. Meanwhile, it should see a boost as customer commitment packages (which consisted of additional modules or flex dollars) it gave to impacted customers begin to roll off later this year.
As the leader in the space, CrowdStrike’s stock should be a long-term winner.
Like CrowdStrike, SentinelOne (NYSE: S) is an endpoint cybersecurity company. Its Singularity Platform uses artificial intelligence (AI) and machine learning to analyze behavior and detect and eliminate threats in real-time. It is also able to automatically roll back any changes to a point in time before a cybersecurity attack occurred.
The company has been growing its revenue quickly, including 29% last quarter, although it’s just barely profitable on an adjusted EPS basis, as it continues to focus on growth over profitability. On a forward price-to-sales (P/S) basis, the stock is very cheap for the type of revenue growth it is generating, trading at about a 5.7 times multiple. That is half the multiple of Palo Alto and a third of CrowdStrike.
Meanwhile, it’s notable that red-hot cybersecurity company Wiz, which just agreed to be acquired by Alphabet, tried to buy SentinelOne back in 2023 to merge the companies. That speaks to the value Wiz saw in SentinelOne’s technology.
Meanwhile, SentinelOne has a big opportunity in the back half of this year when a deal with Lenovo kicks in. The personal computers (PC) vendor will pre-install SentinelOne’s Singularity Platform on all the new PCs it sells while also giving existing users the ability to upgrade their security to the platform. It will also create a new Managed Detection and Response (MDR) service using AI and EDR (endpoint detection and response) capabilities based on the Singularity Platform.
Lenovo is the world’s largest enterprise PC vendor, selling 61.8 million PCs last year. As such, this is a huge potential growth driver and catalyst for a company the size of SentinelOne.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet and SentinelOne. The Motley Fool has positions in and recommends Alphabet and CrowdStrike. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
