Following a monumental run year or so, the stock market is now in a cooling-off period. Consequently, tech stocks that drove the market to record gains have dipped, creating an excellent entry point for investors. Valuations in cybersecurity are down, making it an opportune time for investors to load up on the best cybersecurity stocks to buy.
What sets the cybersecurity stocks apart is the mission-critical nature of their underlying businesses. Many industry bellwethers boast a consistently growing customer retention ratio, pointing to their ability to effectively maintain and expand their user base. The cybersecurity space continues to evolve, with fresh threats emerging each year. Moreover, cyber-attacks can have a material impact on the business, resulting in major financial and operational losses. To put things in perspective, last year’s major hacking attack cost The Clorox Company a whopping $356 million.
That said, here are the three best cybersecurity stocks to buy, which you should bet on for robust gains ahead.
Best Cybersecurity Stocks to Buy: ZScaler (ZS)
ZScaler (NYSE:ZS), a cloud-based enterprise and network security provider, consistently reported robust top-and-bottom-line growth. Moreover, it’s a clean sweep regarding its track record of surpassing earnings and revenue expectations, dating back to the third-quarter (Q3) of 2019. The company’s cloud-native cybersecurity solutions have proven a smash hit with its continuously growing customer base, ensuring safety from threats and breaches.
Moreover, with multiple catalysts in motion, there’s enough reason to believe the firm can continue growing in line with its historical metrics. One of the biggest reasons is its growing adoption among enterprise customers. In its most recent quarter, its annual recurring revenue (ARR) for customers spending $100,000 and $1 million increased by 21% and 31%, respectively.
Furthermore, it’s been making impressive inroads in the federal market, with strong annual contract values (ACV) growth of late. The strong adoption among government agencies is unlikely to slow down anytime soon, spurred by regulatory mandates for enhanced cybersecurity measures. Looking ahead, the firm projects a healthy 31% jump in sales and a 64% increase in non-GAAP operating income in fiscal year (FY) 2024. Given these lofty projections, it remains on course to achieve its long-term goal of $5 billion in ARR by FY 2028.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) may seem like an odd cybersecurity pick, but it’s arguably one of the best secondary plays in the field. The tech giant continues providing investors with fresh incentives to scoop up more stock. Generative AI took its stock to new heights last year, but cybersecurity could be another long-term money spinner for its business. Moreover, cybersecurity can potentially be a major extensor for its ever-evolving software suite.
Some of the products and services the company offers include Microsoft Defender, Azure Security Center, and Microsoft 365 Security. Azure is a huge part of its growth story, and it secures its cloud infrastructure through the Azure Security Center. It includes solutions such as the Active Directory for efficient access management. Additionally, the company advocates for cybersecurity reform and enhances threat intelligence and research to support private and governmental bodies.
Okta (OKTA)
Okta (NASDAQ:OKTA) is another top cybersecurity play, targeting a variety of identity management solutions for both businesses and individual consumers. Like its peers, its financials are a visual marvel, marked by double-digit top-line growth and a healthy progression toward net profitability. However, OKTA stock has historically lagged behind its peers, but recent results have shown it is bucking that trend.
Okta has a lot going for it, and there’s plenty of evidence to show that it will continue growing at an accelerated pace. It has bounced back impressively following its security incident last year, with stellar operating results in recent quarters. Its strong renewal rates, consistently around the mid-90% range, indicate solid and lasting customer relationships.
Okta is not resting on its laurels as its actively pursuing strategies to expand its market share in the coming quarters. Its revenue model restructuring for enhanced sales productivity and its focus on geographic expansion are key drivers for sustained growth. The recent acquisition of Spera and the launch of AI-driven solutions are strategic moves that will further strengthen its influence in the identity security sector.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.