Cyberattacks on corporate and government targets have grown at an alarming rate for years. As a result, investors are increasingly turning to cybersecurity stocks as a reliable place for profits.
Every so often, a major event reminds investors of the world's need for better cybersecurity. For instance, at the end of 2020, attackers targeted SolarWinds (SWI (opens in new tab)), which provides software for more than 300,000 customers, from Fortune 500 companies to the federal government. Thousands of customers' information was compromised. Six months later, a hack of Colonial Pipeline sent gas prices soaring through parts of the United States.
Consider that even amid the market's recent conniptions, the Global X Cybersecurity ETF (BUG (opens in new tab)) remains up 35% over the past year, versus 23% for the S&P 500. Since inception in October 2019, the exchange-traded fund is up 96% versus the index's 51%.
An ETF is one way to gain exposure to cybersecurity. But for investors who prefer more concentrated wagers on individual stocks, there are numerous great companies in this space. Just one problem for some retail investors: Several cybersecurity stocks trade for a pretty penny. Industry leaders Zscaler (ZS (opens in new tab)) and Fortinet (FTNT (opens in new tab)) trade north of $300 per share, while Palo Alto Networks (PANW (opens in new tab)) is well over $500. That might be no big deal for some investors, but for others – especially younger investors – with little capital to work with, those prices represent a significant hurdle.
That's why today, we're going to take a look at three great cybersecurity stocks that each trade for less than $100 per share. Each of these stocks can provide significant exposure to some great growth opportunities in cybersecurity, and they're all accessible to portfolios of just about any size.
Data is as of Dec. 1. Average price targets and analyst ratings provided by market data tool Koyfin.
- Market value: $5.0 billion
- 12-month average price target: $65.00
- Consensus analyst rating: Strong Buy (16 analysts)
Tenable Holdings (TENB (opens in new tab), $46.68) provides software-as-a-service and on-premises cybersecurity solutions. Founded in 2002, the company secures systems against traditional and modern attacks. The company even provides vulnerability assessment solutions to help customers better understand their own cybersecurity needs.
This has all paid off well for TENB, which has grown from a roughly $2 billion company five years ago to $5 billion presently.
Most recently, during their Oct. 26 third-quarter earnings call, Tenable announced that current billings grew 25% year-over-year to $166.9 million, exceeding analyst expectations. This result was powered primarily by their cloud computing products. Also notable was traction in newly acquired operational technology offerings from Alsid, which allows Tenable to assess the security states not only of digital infrastructures but also Active Directory domains.
Jonathan Ho, an analyst at William Blair who rates TENB at Outperform (equivalent of Buy), was "encouraged by the strong performance this quarter." He believes long-term, Tenable will continue to see strong growth encouraged by the world's need for improved cybersecurity.
Stifel analyst Brad Reback (Buy), meanwhile, says the company will continue to benefit from "an expanding product set that can effectively meet the growing cybersecurity needs of its customer base."
Tenable Holdings is easily one of the best cybersecurity stocks under $100 right now, according to analysts. Among the 16 pros surveyed by Koyfin, six give it a Strong Buy rating, and the remaining 10 give it a Buy. That's good for a Strong Buy consensus rating in Koyfin's eyes. Meanwhile, a 12-month average analyst price target of $65.00 implies nearly 40% upside over the next year or so.
- Market value: $5.1 billion
- 12-month average price target: $83.87
- Consensus analyst rating: Buy
Mimecast (MIME (opens in new tab), $76.34) is the worst-rated pick among these three under-$100 cybersecurity stocks, and it still earns a solid consensus Buy rating, according to the 15 analysts surveyed by Koyfin. Specifically, four analysts rate MIME at Strong Buy, six call it a Buy and the remaining five say it's a Hold; the stock has no Sell or Strong Sell recommendations.
Mimecast provides cloud-based security of corporate information and communications. This offers email protection beyond what most mail servers are capable of providing. And the company's security systems protect against malicious URLs and attachments, viruses, phishing attacks and many other cyberthreats.
Needham analyst Alex Henderson (Buy) says MIME's micro-services architecture gives them "substantial advantages in delivering new features."
"We believe Mimecast is one of the premier companies protecting against email-borne threats," he adds. And since email is at the core of today's corporate communications, it remains "a large and pervasive threat vector."
At its Nov. 2 earnings call, Mimecast reported $147.2 million in revenue for its fiscal Q2 2022, up 16% year-over-year on a constant-currency basis. Meanwhile, adjusted earnings of 40 cents per share easily cleared analysts' expectations for 33 cents.
One of the only major drawbacks of MIME shares right now is valuation. An average 12-month price target of $83.87 results in a decent (but not outstanding) projected return of about 10% from current levels. Meanwhile, a forward price-to-earnings ratio of 62 and a price/earnings-to-growth ratio of 2.0 both indicate that Mimecast is much more expensive than the broader market and technology sector alike.
While Wall Street is largely high on the company, those on the sidelines are largely concerned with price. More value-minded investors might want to wait for cheaper levels before diving in.
- Market value: $5.4 billion
- 12-month average price target: $74.35
- Consensus analyst rating: Strong Buy
Varonis Systems (VRNS (opens in new tab), $50.20) was included on Kiplinger's list of small-cap stocks to buy for the rest of 2021, and very little has changed in the investment thesis for this company since then.
Varonis Systems' software allows corporations to secure data stored on premises or in the cloud. And this has proven to be very lucrative for the company, which has swelled from $750 million in market value back in late 2017 to well more than $5 billion today.
On a Nov. 2 earnings call, CEO Yaki Faitelson announced Q3 2021 was the first quarter where the company surpassed $100 million in revenue. This is primarily due, he says, to the world becoming even more aware of how important secure data is to doing business today.
Wedbush analyst Dan Ives (Outperform) says the company's "ability to further penetrate its customer base is playing out." He adds that this "sets the stage for a few more 'beat and raise' specials over the next few quarters."
William Blair's Jason Ader, who also has VRNS at Outperform, says the company will "continue to see strong upside potential," based primarily on its moat, limited competition and expanding licensing opportunities.
Of the 21 analysts surveyed by Koyfin who cover this stock, six currently rate it as a Strong Buy, 12 as a Buy and only three as a Hold. That's enough for Koyfin to consider this stock a Strong Buy, and makes VRNS one of the best cybersecurity stocks in the eyes of the pros.
Meanwhile, an average price target of $74.35 implies a whopping 48% in upside over the next 12 months.
Michael Adams's financial writing career has spanned roles with KCI Communications, The Motley Fool, InvestorPlace, InvestingDaily and other major financial publishing outlets. Michael’s personal investing style is based on a buy-and-hold approach of primarily up-and-coming tech businesses. He uses fundamental analysis to find great companies with the possibility for tremendous growth over the course of years.
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