The world has seen a wave of digitalisation in the wake of the pandemic as more people go online to purchase goods and communicate with loved ones.
Mobile devices and laptops are making it quicker and more efficient to transact and communicate.
The downside, however, is a surge in the number of scams as fraudsters use ransomware and malware to steal information and money.
This is why cybersecurity is such a critical sector as companies there help to protect their clients from fraud and unauthorised access.
Cybersecurity businesses enjoy long-term tailwinds as more and more organisations digitalise and require adequate protection for their growing IT systems.
Here are four US cybersecurity stocks that look poised to ride this wave.
Okta (NASDAQ: OKTA)
Okta offers an identity and authentication cloud platform to help organisations manage their employees’ access privileges.
The company’s software helps clients mitigate risks by reducing the time to detect and respond to malicious threats.
Its identity cloud solution also helps to reduce maintenance costs and streamline operations.
For its fiscal 2024’s first half (1H FY2024) ending 31 July, Okta reported a 23.9% year on year jump in revenue to US$1.1 billion, of which subscription revenue took up more than 97% of the total.
This impressive performance comes after a near-43% year on year growth in revenue for FY2023.
For 1H FY2024, Okta also generated a positive free cash flow of US$73 million.
Okta expects a free cash flow margin of around 15% for FY2024 because of its reduced cost structure, a sharp improvement from the 3.5% logged in FY2023.
Its customer base as of 31 July stood at 18,400, a 4.5% increase from the 17,600 as of 31 January.
Over the same period, customers with an annual contract value (ACV) of more than US$100,000 increased by 7% to 4,205.
Okta believes that it has a US$80 billion total addressable market (TAM) that it can tap into for further growth.
Crowdstrike (NASDAQ: CRWD)
Crowdstrike is a cybersecurity firm providing cloud protection for endpoints, workloads, identity and data.
Its Falcon platform provides scalable deployment, protection, and performance to clients.
For 1H FY2024, Crowdstrike reported a 39.2% year on year jump in revenue to US$1.4 billion.
Of this total, subscription revenue took up US$1.34 billion or around 94.2% of the total.
Free cash flow climbed 42.2% year on year to US$417 million.
The strong performance came after a 54% year-on-year surge in revenue to US$2.24 billion for FY2023.
Around a quarter of customers use seven or more cloud modules with around 63% using five or more modules.
Crowdstrike’s annual recurring revenue (ARR) also grew at an impressive 37% year on year to US$2.9 billion for the second quarter of FY2024.
The company has identified a TAM of US$76.1 billion that is growing at 13% per year.
The potential TAM by calendar year 2026 is estimated at around US$158 billion.
Zscaler (NASDAQ: ZS)
Zscaler operates its Zero Trust Exchange platform that protects customers from cyberattacks and data loss by ensuring secure exchanges and data transfers.
The cybersecurity business reported a stellar set of results for fiscal 2023 (FY2023) ending 31 July 2023.
Revenue came in at US$1.6 billion, up 48% year on year, and builds on the 62% year-on-year surge in revenue for FY2022.
Free cash flow also jumped by 44.2% year on year to US$333.6 million for FY2023.
Zscaler has guided for FY2024 revenue to rise by between 27% to 28% year on year with operating profit margins rising by between 1 to 1.5 percentage points.
The cybersecurity firm saw its ARR double in seven quarters to US$2 billion with its next target set at ARR of US$5 billion.
Its customer momentum has also been strong.
Customers with ARR of US$100,000 and more rose nearly 25% year on year to 2,609 while those with ARR of US$1 million or more shot up 37% year on year to 449.
Fortinet (NASDAQ: FTNT)
Fortinet is a cybersecurity company with an integrated portfolio of over 50 enterprise-grade products.
The company announced a strong set of earnings for its 2023 first half (1H 2023) ending 30 June.
Revenue improved by 28.5% year on year to US$2.6 billion while net profit soared 64.8% year on year to US$514 million.
The company’s free cash flow also nearly doubled year on year to US$1.1 billion.
Fortinet saw its billings rise 18% year on year to US$1.5 billion.
Including secure networking, cybersecurity and cloud security, Fortinet estimates that its TAM is US$122 billion at present and will grow to US$192 billion by 2027.
The company sees catalysts such as heightened awareness of threats along with edge computing as drivers of future growth.
It intends to increase marketing and research and development expenses to boost organic growth.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
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