Top Cybersecurity Stocks for Q4 2020
Cybersecurity companies provide services to protect electronic information from theft or damage. Businesses in the cybersecurity industry utilize both software and hardware to ensure that computing devices and data are not misused. The industry serves a broad array of customers including individuals, businesses, and government, among others. Some of the leading names in cybersecurity include Check Point Software Technologies Ltd. (CHKP) and NortonLifeLock Inc. (NLOK). The cybersecurity industry as represented by the benchmark First Trust Nasdaq Cybersecurity ETF (CIBR) has significantly outperformed the broader market in the past 12 months. CIBR has provided 1-year trailing total returns of 29.8% as compared with 15.7% for the Russell 1000.1 These market performance data and all statistics below are as of September 29, 2020.
Here are the top 3 cybersecurity stocks with the best value, fastest growth, and most momentum for Q4 2020. Note that the companies on our list are primarily pure-play cybersecurity companies, while CIBR includes a wider variety of related stocks in its portfolio.
Best Value of top Cybersecurity Stocks for Q4 2020
These are the cybersecurity stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
- NortonLifeLock Inc.: NortonLifeLock is a consumer cybersecurity company. The company provides protection services for devices, identity, home networks, and online privacy. For Q1 FY 2021, ended July 3, NortonLifeLock reported strong growth in the midst of the COVID-19 pandemic. That included 9% year-over-year (YOY) growth in consumer reported billings and more than 400,000 new customers compared to the same quarter a year earlier.2
- CACI International Inc.: CACI International is an information technology products and services company. The company provides information assurance and security as well as systems integration, reengineering, electronic commerce, and related services. Its Domestic Operations segment serves primarily U.S. federal government agencies, and state and local governments. Its International Operations segment serves foreign governments and commercial customers.
- Check Point Software Technologies Ltd.: Check Point Software Technologies develops and builds both software and hardware products for information technology (IT) security. The company offers network and gateway security services, data and endpoint security services, and management solutions. For Q2 2020, Check Point reported a 4% YOY increase in revenue and a 5.4% increase in GAAP net income. The company has benefited from a large-scale business shift toward cloud technology during the COVID-19 pandemic.3
Fastest Growing Cybersecurity Stocks
These are the cybersecurity stocks with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
- NortonLifeLock Inc.: See above for company description.
- CACI International Inc.: See above for company description.
- Qualys Inc.: Qualys offers IT security and compliance management services. The company’s product offerings address vulnerability management, malware detection, policy compliance, web application scanning, and similar security issues. For Q2 2020, Qualys reported a 12.5% YOY increase in revenue growth, and a 62.3% gain in net income. Philippe Courtot, chairman and CEO, attributed the strong performance to the increase in IT and cybersecurity challenges across industries due to shifts toward remote working during the COVID-19 pandemic.4
Cybersecurity Stocks with the Most Momentum
These are the cybersecurity stocks that had the highest total return over the last 12 months.
- Zscaler Inc.: Zscaler provides security software and related services. The company offers a cloud-based web and mobile security platform that also addresses threat protection, cloud application visibility, and networking challenges. On September 29, the company announced that it had extended its strategic partnership with cloud computing company VMware Inc. to expand its security offerings to large global enterprises.5
- CrowdStrike Holdings Inc.: CrowdStrike Holdings is a holding company which, through subsidiaries, offers cybersecurity services. The company provides a platform designed to protect enterprise and address attacks on endpoints. CrowdStrike serves customers around the world.
- Cloudflare Inc.: Cloudflare is an application software company. Among Cloudflare’s offerings are solutions for cybersecurity, analysis, domain registration, load balancing, and video streaming. On September 30, the company announced the launch of Radar, a free public tool that allows users around the world to view global internet traffic and security trends in real time.