In today’s increasingly interconnected world, strengthening digital defenses is crucial, as evidenced by the rise in cyber threats. Given this backdrop, investors could keep a watchful eye on fundamentally strong software-security stocks, Tenable Holdings, Inc. (TENB), Fortinet, Inc. (FTNT), and Check Point Software Technologies Ltd. (CHKP).
In the current digital era, the need to enhance cybersecurity is more critical than ever. The global cybersecurity market is expected to reach $208.80 billion this year, prompting companies to make substantial investments to counter escalating threats. With cyberattacks becoming more frequent and expensive, businesses can no longer afford to cut corners on security.
Software companies continuously innovate and partner with others to keep pace with the ever-changing tactics of cybercriminals while also investing heavily in research and development. These efforts have significantly strengthened the cybersecurity industry. The global cybersecurity market is projected to grow at a CAGR of 12.3% by 2030.
Given these encouraging trends, let’s look at the fundamentals of the top three Software - Security stocks, beginning with the third choice.
Stock #3: Tenable Holdings, Inc. (TENB)
TENB offers exposure management solutions for managing cybersecurity risk in IT environments. Its solutions include Tenable Vulnerability Management, Cloud Security, Identity Exposure, Web App Scanning, Lumin Exposure View, Attack Surface Management, Security Center, and more.
On September 18, 2024, TENB announced the availability of Tenable Enclave Security, a solution that supports the needs of customers operating in highly secure environments, such as those that are classified or otherwise air-gapped.
Backed by Tenable Security Center, Tenable Enclave Security protects IT assets and modern workloads with risk assessment and contextual insight so organizations can identify exposures before they cause damage.
TENB’s trailing-12-month gross profit margin of 77.43% is 56.1% higher than the industry average of 49.60%. Its trailing-12-month levered FCF margin of 19.96% is 96.3% higher than the industry average of 10.17%.
For the fiscal 2024 second quarter that ended June 30, 2024, TENB’s revenue increased by 13.4% year-over-year to $221.24 million. Its gross profit came in at $172.44 million, showing an increase of 13.8% year-over-year.
Moreover, the company’s non-GAAP income from operations was reported to be $42.78 million, a 41.6% increase from the previous year’s quarter. In addition, TENB’s non-GAAP net income was $38.16 million or $0.31 per share, a 45.3% and 40.9% year-over-year increase.
Street expects TENB’s revenue and EPS for the fiscal third quarter ending September 2024 to increase 10.8% and 28.4% year-over-year to $223.21 million and $0.30, respectively. Plus, the company has topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of TENB have gained 2.9% over the past three months to close the last trading session at $40.28.
TENB’s positive fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
TENB has an A grade for Growth and a B for Sentiment. It is ranked #8 out of 23 stocks in the Software - Security industry.
Click here to access additional TENB ratings (Momentum, Value, Quality, and Stability).
Stock #2: Fortinet, Inc. (FTNT)
FTNT offers cybersecurity and networking solutions globally. The company’s FortiGate hardware and software licenses provide various security and networking functions. It also offers the FortiSwitch product family, which provides secure switching solutions for connecting customers to their end devices.
On August 27, FTNT announced the addition of sovereign SASE and generative AI capabilities to its robust unified SASE solution. Fortinet Unified SASE provides complete integration between Fortinet’s Secure SD-WAN solution and cloud-delivered security service edge (SSE) under a single console for seamless management, visibility, and security. This new update offers customers unparalleled deployment flexibility and simplicity.
On August 6, the company acquired Next DLP, a leader in insider risk and data protection. This acquisition will help FTNT to improve its position in the standalone enterprise data loss prevention (DLP) market and strengthen its leadership in integrated DLP markets within endpoint and SASE in alignment with its business strategy.
FTNT’s trailing-12-month gross profit margin of 78.09% is 57.4% higher than the industry average of 49.60%. Likewise, its trailing-12-month EBITDA margin of 28.15% is 179% higher than the industry average of 10.09%.
For the second quarter of 2024, which ended on June 30, FTNT’s total revenues increased 10.9% year-over-year to $1.43 billion. Its gross profit rose 16.3% from the year-ago value to $1.16 billion.
Its non-GAAP operating income stood at $503.60 million, up 44.7% year-over-year, while its non-GAAP net income amounted to $439.90 million, representing an increase of 46.4% from the last year. Also, the company’s non-GAAP EPS for the quarter increased 50% year-over-year to $0.57.
FTNT forecasts fiscal year 2024 revenue to range from $5.80 billion to $5.90 billion, with billings between $6.40 billion and $6.60 billion. In addition, it anticipates its non-GAAP gross margin to fall between 79% and 80% and non-GAAP net income per share in the range of $2.00 and $2.04.
Street expects FTNT’s revenue for the fiscal third quarter (ending September 2024) to increase 10.9% year-over-year to $1.48 billion. Moreover, its EPS estimate of $0.52 for the same period indicates a 26.5% year-over-year growth. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
FTNT’s stock has surged 11.6% over the past six months to close the last trading session at $75.66.
FTNT’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
FTNT has an A grade for Quality and a B for Sentiment. It is ranked #7 in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have FTNT ratings for Momentum, Growth, Value, and Stability. Get all FTNT ratings here.
Stock #1: Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security globally. The company offers a multilevel security architecture, cloud, network, mobile devices, endpoint information, and IOT solutions.
On July 11, CHKP announced that its board of directors had authorized a $2 billion expansion of the company’s ongoing share repurchase program. This expanded buyback, expected to be completed by the fourth quarter of 2024, reflects confidence in the company’s financial health and aims to boost shareholder value and investor sentiment.
For the fiscal second quarter that ended June 30, 2024, CHKP’s total revenues stood at $627.40 million, up 6.6% year-over-year, while its non-GAAP operating income increased marginally from the year-ago value to $265.10 million. The company’s non-GAAP net income and earnings per share increased 3.2% and 8.5% over the prior-year quarter to $246 million and $2.17, respectively.
The consensus revenue estimate of $635.06 million for the fiscal third quarter (ending September 2024) represents a 6.5% increase year-over-year. The consensus EPS estimate of $2.25 for the ongoing quarter indicates an 8.7% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
CHKP shares have surged 39.2% over the past year and 25.1% year-to-date to close the last trading session at $191.09.
CHKP’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has an A grade for Quality. Within the same industry, CHKP is ranked #6.
Click here to access additional ratings of CHKP for Stability, Growth, Sentiment, Value, and Momentum.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
FTNT shares were trading at $76.60 per share on Friday afternoon, up $0.94 (+1.24%). Year-to-date, FTNT has gained 30.87%, versus a 20.01% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Cybersecurity Stocks to Watch as Data Breaches Rise StockNews.com
