Work at Home Boosts Cybersecurity Sector: 7 Stocks to Know About

The digital transformation of business in recent years has boosted demand for stocks in the cybersecurity sector. The more recent trend toward working at home has given an additional push to security needs. Several leading experts and contributors to MoneyShow.com highlights some favorite ideas in the cyber space. Richard Moroney, Dow Theory Forecasts Akamai Technologies seems built for the coronavirus quarantine and may be one of few companies to exit the recession in a stronger position than where it entered. With more than 250,000 servers in 130 countries, Akamai operates a massive computing platform focusing on two businesses: cybersecurity and online content-delivery networks. The pandemic appears to be accelerating long-term trends that should benefit Akamai as telecommuting heightens the importance of Akamai's security products. The biggest question mark for Akamai revolves around its exposure to the travel and hospitality; Akamai's customers include some of the biggest global airlines, hotels, and cruise lines -- all suffering sharply lower demand that may not reverse until next year. In late April, management withdrew its 2020 guidance, citing concern over the outlook for the retail and travel industries. But its June-quarter forecast calls for strong growth. Akamai trades at 20 times estimated 2020 earnings, a 12% premium to the industry average. That premium seems justified considering Akamai's growth profile and increasingly bullish analyst estimates. Earning an Overall score of 91 out of 100 in our proprietary quantitative ranking system, Akamai is a long-term buy. Jon Markman, Pivotal Point In this age of telecommuting, knowing exactly who is logged into the network and from what location is essential for businesses to track productivity and manage employees. That kind of vital demand is already being provided by some great businesses. One of them is Okta Inc. . Okta provides multi-factor authentication to enterprises, partners and customers. The San Francisco-based company has become a digital passport provider to over 7,000 organizations. And the work from home trend's acceleration only increases the value of the business. Like many newcomers in Silicon Valley, Okta was born in the cloud era. Todd McKinnon and Frederic Kerrest, two former Salesforce engineers, recognized that managing employee and customer identity across disparate software platforms had become needlessly complicated. Lost passwords and application lockouts were dampening the productivity benefits of the cloud. Okta software gives employees a single login. It's seamless and there are no passwords to remember. When they leave the company, their access is automatically revoked. This kind of security is vital. Most data breaches are the result of weak or stolen login credentials. Okta identity management negates credentials. It also provides managers with a live dashboard showing who is logged in, and from what location. That peace of mind is more important than ever with so many employees working outside of the office. Okta is the clear leader in enterprise identity management. The Okta Identity Cloud works with thousands of enterprise apps. The business is on a roll. Its stock has risen 69% this year, and 1,032% since the IPO in 2017. Sales have also surged, from $85.9 million in 2016 to $586 million through fiscal 2020. Managers have found a way to monetize enterprise identity. They also built a business that is largely immune from competitors because the architecture is vendor neutral. The company still does not have earnings, but managers expect to turn profitable in 2022. Currently, shares are trading at around 40 times sales. Mike Cintolo, Cabot Top Ten Trader Cybersecurity is more imperative than ever now that more and more people are working from home, and companies that provide cyber threat management solutions are rushing to fill this need. Fortinet is an established player in the field, providing end-to-end cybersecurity for enterprise customers, which eliminates the need to build a system with multiple vendors. It offers a robust range of products and services, with its SD-WAN and VPN offerings seeing rising demand from larger firms in Covid's wake since they allow users to avoid delays in accessing applications and can handle order-of-magnitude workload increases. It's worth noting that Fortinet is one of the fastest growing SD-WAN providers and the only major player in that market that provides security and SD-WAN networking in a single solution. All told, Fortinet has always had a solid story and growth numbers, and if anything, those trends are picking up steam as more of everything moves online. The shares broke out nicely on earnings and have continued higher since. Modest dips are possible but we're not expecting a major pullback. Zscaler also offers cloud-based cybersecurity and has a very bright present and future as millions of Americans work from home and as the cloud becomes the norm in the business world. While it was expected that shutdowns would be good for business, Zscaler shocked everyone when it announced gangbuster fiscal third-quarter numbers that were well above estimates. A new cloud security contract with the U.S. Defense Dept. (potentially adding 500,000 users to its tally) also helped. Moreover, Zscaler isn't resting on its laurels, using some of its growing cash position in recent purchases of early stage companies Cloudneeti and Edgewise. Meanwhile, the firm's Zscaler Private Access product -- which is rapidly replacing traditional firewalls and VPNs in the cloud era -- was a key growth engine as hundreds of thousands of new Access users went live at big clients. The mobile and cloud movements have pushed cybersecurity into a new era, and Zscaler is one of the new-age leaders in the field. Eddy Elfenbein, Growth Stock Advisor One sector that's seen business improve in the coronavirus environment is cybersecurity. As unpleasant as it sounds, there are folks who are so crooked that they'll seize on a disaster to scam people out of their money. That's where companies like Israeli cybersecurity firm Check Point Software come in. The company is truly one of the best in the biz. The company saw a dramatic rise in the number of coronavirus-related cyberattacks -- apparently, scammers have had a field day running Covid-19 scams. That kind of behavior is good business for Check Point. Since January, Check Point said that 68,000 Covid-related domain names have been registered, and that the company identified the malicious domains at double the rate of others. This shows you why businesses and governments need the services provided by Check Point. The firm's researchers discovered malicious apps masquerading as legitimate coronavirus-related apps, containing a range of malware aimed at stealing user data or generating revenue. It's no surprise that Check Point had a very good earnings report. For the first quarter, the firm earned $1.42 per share. That beat Wall Street's forecast by four cents per share. It's also up from $1.32 per share for last year's first quarter. If you're looking for a top name in cybersecurity that's thriving in these difficult times, then Check Point Software fits the bill. Carl Delfeld, Cabot Global Stocks Explorer Cybersecurity is one of the fastest-growing segments of IT spending. Chief Information Officers consistently rank cybersecurity as their top spending priority. In 2019, the average total cost of a data breach for a company was $3.9 million, with 36% of the cost coming from the loss of customer trust. Damages from cybercrime could cost the world $6 trillion annually by 2021, prompting individuals, companies, and governments to spend a bundle with cybersecurity firms to provide sophisticated software and services to protect proprietary data. Cybersecurity is a powerful theme that will be further fueled by the growth of new technologies that offer connectivity to data, such as machine learning, cloud computing, and the internet of things. Using my trademark shotgun and rifle strategy of combining an ETF with a specific stock pick, let's take a look how you can profit from this cybersecurity theme. Global X Cybersecurity ETF is a basket of cybersecurity stocks of companies developing and managing security protocols to prevent intrusion and attacks on systems, networks, applications, computers and mobile devices. This ETF has 29 holdings and the top 10 stocks represent roughly 60% of the total market value of the basket. Seventy-four percent of the companies are incorporated in America, followed by 13% in Israel and 8% in Japan. Founded in 2005, it is one of the more established cyber pure plays on the market and has expanded its suite of services and warded off upstart disrupters by purchasing smaller start-ups. For now, we recommend buying one half of our intended position in this fund. Cloudflare is an aggressive cybersecurity recommendation, which went public last year, got its start offering Internet security and website performance services The company recently reported strong first-quarter numbers. Total revenue was $91.3 million, increasing 48% year over year, and its gross margin was 77%. The company's net loss per share was $0.11, compared to a loss of $0.20 in the first quarter of 2019, as it reported a cash and equivalent position of $588 million. Geographically, sales in the U.S. region climbed 44% year over year and represent 40% of total revenue. The company recorded a 62% year-over-year surge in its international business, mainly driven by a 58% increase in Europe. In addition, during the first quarter, the company added 250,000 new customers, bringing the total free and paying customer count to 2.8 million, representing a year-over-year jump of 40%. The company is growing fast and appears to be gaining market share and some analysts expect its revenue to double by 2022. I suggest investing in Cloudfare and consider pairing it with the more conservative cybersecurity play -- the Global X Cybersecurity ETF.

Work at Home Boosts Cybersecurity Sector: 7 Stocks to Know About

Cybersecurity is a powerful theme that will be further fueled by the growth of new technologies.

Columnist Conversation

Jobs Report Reaction: Incredibly Strong, But Questions to Ask

This Weekend on Real Money

AMD Second-Quarter Earnings Live Blog

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.