Russian military forces have now entered Ukraine in what increasingly looks like a full-scale invasion. In response, sanctions on Russia by the US and other Western countries are likely to increase, along with other punitive measures. And based on past performance, Russia is likely to respond with cyberattacks on US and Western networks.
The likelihood on increased cyber-insecurity should have network administrators worried – and should give a boost to cybersecurity firms. Looking at the scene from Wedbush, tech expert Daniel Ives writes, “…there is a growing concern that massive cyber warfare could be on the near-term horizon which would certainly catalyze an increase in spending around preventing sophisticated Russian-based cyber-attacks going after datacenters, networks, vulnerability points, and other highly sensitive data. With many high-profile cyber security attacks coming from Russia over the past few years it’s a matter of when not if this increased cyber warfare activity begins over the coming weeks with the Ukraine invasion a ‘powder keg situation’ with broader cyber war implications felt around the globe.”
Ives points out a list of cybersecurity companies that are likely to see benefits from the Russia-Ukraine crisis. We’ve used the TipRanks database to pull up the latest details on three of them. The Street evidently feels they have plenty to offer investors; all are rated as Strong buys with plenty of gains projected. Let’s dive in.
CyberArk Software (CYBR)
We’ll start with CyberArk, a leader in identity security solutions. CyberArk has over 7,000 customers across 110 countries, including more than half of the Fortune 500 companies. CyberArk’s products include privileged access management for vendors and cloud access, with applications to both workforce and customers populations. The company offers solutions for defense against cyberattacks, as well as audit and safety inspection compliance.
A key measure of a digital company’s success is the recurring revenue, and CyberArk has excelled there. The company’s ARR (annual recurring revenue), grew 44% to $393 million in 4Q21, accelerating from +38% in Q3.
This was just part of what management described as a record quarter and a record year for the company. In its recent 4Q21 earnings release, CyberArk showed new highs in both quarterly and full-year revenue, at $151.3 million and $502.9 million. Service subscription revenue, at $47.6 million, was up 142% from the year-ago quarter. The company finished 2021 with approximately $1.2 billion in cash and liquid assets.
Looking ahead, CyberArk expects to keep growing. 1Q22 revenue is predicted at $125 million to $133 million and for the full year, the company is guiding toward $582 million to $598 million. At the midpoint, these guidance estimates suggest a 15% sequential gain and a 17% full-year gain at the top line.
In coverage for Morgan Stanley, analyst Hamza Fodderwala notes that current conditions are strongly encouraging new customers in the cybersecurity space, writing, “…we think there are several underlying drivers that could drive upside including: 1) a stronger demand environment, particularly for CyberArk’s core Privileged Access Management (PAM) solution to secure sensitive data against growing cyber threats. We also growing attach rate from emerging use cases like DevSecOps and broader Access Management (SSO/MFA)….”
Fodderwala’s general outlook is bullish, shown by his Overweight (Buy) rating on the stock and the $235 price target that implies an upside of 70% for the year ahead. (To watch Fodderwala’s track record, click here.)
Wall Street likes CyberArk, as is clear from the Strong Buy consensus rating based on 17 reviews, including 15 Buys against just 2 Holds. The shares are priced at $138.33 and have an average price target of $198.18, suggesting 43% growth in the next 12 months. (See CyberArk’s stock analysis at TipRanks.)
CrowdStrike Holdings, Inc. (CRWD)
Next up, CrowdStrike, is one of cybersecurity’s biggest names. This $37 billion company has been in the business for over a decade, and its line of Falcon Endpoint Protection products have become the gold standard in the realm of online and system security solutions.
Being an early leader in its field has brought CrowdStrike several advantages, most notably a head start in attracting customers. The company’s most recent reported quarter, F3Q22, showed it reaching 14,687 customers, a 75% yoy gain. Even better, CrowdStrike has reported a cumulative 120% retention rate over the past 15 quarters, translating to a 20% increase in the average customer’s annual spending.
The upshot of this is consistently rising revenues and earnings. At the top line, the company reported $380 million in F3Q, up 63% yoy, while EPS more than doubled, from 8 cents in the year-ago quarter to 17 in this most recent report.
But with all of that, CrowdStrike has seen its shares fall by 53% since peaking in November of last year. There are numerous reasons for this drop, including rotation from growth names to value amidst higher inflation and the prospects of rising interest rates (which are negative for growth stocks) and the general pullback across the markets.
Market fluctuations aside, the opportunity for cybersecurity leaders such as Crowdstrike is still large. By some estimates, cybercrime, which totaled $3 trillion in 2015 and $6 trillion in 2021, could hit $10.5 trillion per year by 2025. CrowdStrike itself estimates that its TAM, for now, stands in the range of $50 billion to $60 billion, but could double by 2025. Even against the increased pressure of additional competition, the market leader feels confident that it can continue expanding with its market.
Analyst Trevor Walsh of JMP agrees. Looking at the cybersecurity landscape, he writes, “The threat posed by malicious cyber actors continues to rise at an elevated pace, with a multitude of cybersecurity vendors providing tools and services to help combat the issue, creating a total market opportunity that we estimate could reach over $250 billion by 2025.”
Turning to CrowdStrike and its opportunities, Walsh says, “We think investors should consider the following key investment positives: 1) CrowdStrike’s cloud-native platform enables the company to quickly expand into new areas of cybersecurity, leading to a company calculated TAM of $115 billion by 2025; 2) given its wide product portfolio [and] thoughtful technology partnerships… CrowdStrike is well-positioned to address trending XDR market opportunities; and 3) the company benefits from a highly tuned go-to-market engine, with wellaligned sales and marketing efforts from top level brand awareness to tactical sales execution in the field…”
These comments support an Outperform (Buy) rating on the stock, and Walsh’s $275 price target indicates potential for 70% share appreciation by year’s end. (To watch Walsh’s track record, click here.)
The Strong Buy consensus rating on CrowdStrike rests on 24 recent stock reviews, which break down to 21 Buys, 2 Holds, and 1 Sell. CRWD shares are priced at $161.83 and have an average price target of $269.52; this gives the stock a 66% one-year upside. (See CrowdStrike’s stock forecast at TipRanks.)
Tenable Holdings, Inc. (TENB)
We’ll wrap up this list with Tenable, a company whose chief product, Nessus, protects users from cyber exposure. At heart, Nessus is a vulnerability scanner, giving users the ability to locate and seal weak points in their networks. Tenable also offers a line of software products, designed to let users see, predict, and act on specific network exposure weaknesses. Tenable’s products are popular with Fortune 500 companies, and the company boasts that it has assessed over 68,000 vulnerabilities through its installed plug-ins.
That Tenable is gaining from an increasingly dangerous cyber environment is clear from the company’s steady expansion. The most recent quarter reported, 4Q21, showed the eighth consecutive quarter of sequential top-line gains, as revenue grew from $138 million in Q3 to $149 million. This was a 26% yoy gain. Non-GAAP EPS came in at 5 cents, a drop from the 13 cents reported in the year-ago quarter – but higher than the 3 cents analysts had expected.
For the full year 2021, the numbers were just as solid. Revenue was up 23% yoy to $541.1 million, and non-GAAP EPS grew from 2020’s 19 cents to 34 cents. The company saw unlevered free cash flow of $95.2 million for the year, more than double the previous year’s $44.3 million.
Fueling this growth is Tenable’s steady drive to expand its operations and customer base. The company announced this month that its Technology Ecosystem had reached a total of 100 partners, with 200 integrations. And on February 1, Tenable announced it had entered an agreement to acquire the attack path management firm Cymptom. Neither company disclosed terms of the deal, which is expected to close during the current quarter.
We can check back in with Wedbush’s Daniel Ives, who writes of Tenable, “We believe TENB has just started to penetrate its customer base and is in the very early innings of capitalizing on a significant market opportunity that is morphing from a narrow vulnerability management solution into a broader cyber risk exposure platform. In our opinion, TENB at current levels is still an undervalued asset given the value of the company’s core product franchise on cloud which remains a key area of technology spending going forward as today only 44% of workloads sit on the cloud and are poised to be at 55% by the end of 2022. TENB remains one of our top picks across all of tech…”
In line with these bullish comments, Ives rates TENB stock as Outperform (Buy), and his $70 price target suggests it has a 56% one-year upside potential. (To watch Ives’ track record, click here.)
Ives’ colleagues agree. This stock has a unanimous Strong Buy from Wall Street’s analysts, based on 10 recent positive reviews. The average price target of $66.70 implies a 48% upside from the share price of $44.97. (See Tenable’s stock analysis at TipRanks.)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.