Cybersecurity

3 Cybersecurity Stocks to Buy for the Next Bull Market: March 2024

Global IT spending is estimated to reach $5.1 trillion in 2024. With the growth of the IT market, cybersecurity is of paramount importance in building a strong defense against cyber threats.

Therefore, it is no surprise that this industry is growing at a healthy pace. From an investment perspective, there are attractive cybersecurity stocks to buy in a large market with multibagger returns.

To put it in perspective, the global cybersecurity market was worth $190.4 billion in 2023. The market size is expected to grow to $298.5 billion by 2028. Therefore, there is plenty of room for growth for some of the best cybersecurity companies.

In this column, we discuss three cybersecurity stocks to buy that represent companies with high growth potential. Additionally, these companies are likely to generate strong free cash flow over the next five years. Let’s discuss the market potential and why we’re bullish on these stocks.

CrowdStrike Holdings (CRWD)

A person holding a smartphone with the logo of American software company CrowdStrike Holdings (CRWD) displayed on the screen in front of a website. Look at your phone's display. Uncensored photo.

Source: T. Schneider / Shutterstock.com

crowdstrike holdings (NASDAQ:CRWD) is probably the best name to buy among cybersecurity stocks. CRWD stock has soared 150% in the past 12 months, and I remain bullish on its growth story.

The company provides cybersecurity solutions worldwide. CrowdStrike provides cloud-delivered protection for endpoints, cloud workloads, identities, and data.In recent news, the company has Nvidia (NASDAQ:NVDA) Utilize AI for cybersecurity. This partnership will ensure CrowdStrike provides the best service to its enterprise customers.

Revenue growth is solid, but we’d like to keep an eye on the following metrics. CrowdStrike reported that his free cash flow for fiscal year 2024 was $938 million. He has a total addressable market of $225 billion by 2028, so I expect the company to become a cash flow machine over the next five years. My view is underscored by the fact that FY24 subscription revenue ballooned to his $2.9 billion, up 36% year over year.

Overall, the company’s business is essential to the technology industry. I expect healthy growth to continue, and market valuations will be positively impacted as cash flows expand.

Cloudflare (NET)

Logo of Cloudflare (NET), an American web infrastructure and security company, website on iOS.

Source: Koshiro K / Shutterstock.com

cloudflare (New York Stock Exchange:Net) stock is trending upwards, with a return of 73% over the past 12 months. In my opinion, compensation can be used as an opportunity to consider exposure. Given the 5-year investment horizon, NET will likely be a multibagger.

At a high level, Cloudflare provides an integrated cloud-based security solution. This solution targets public clouds, private clouds, on-premises, Software-as-a-Service applications, and IoT devices. Speaking of scale, Cloudflare reports that it blocks 182 billion cyber threats per day.

It is worth noting that as of 2026, the company’s total addressable market is $204 billion. This provides headroom for robust growth. Additionally, Cloudflare reported 48% of its revenue outside the United States. With a wide geographical presence, there is plenty of room for growth in new markets.

I should add here that with healthy growth, the company’s operating margin will expand by 500 basis points to 9% in 2023. We expect similar margins this year, but healthy revenue growth should translate into higher cash flow.

Data Dog (DDOG)

Datadog (DDOG) logo displayed on a laptop screen.

Source: Karol Ciesluk / Shutterstock.com

data dog (NASDAQ:DDOG) is another name for a cybersecurity stock aiming for multi-bagger returns. DDOG stock is already trending higher, and I think it will continue to do so for the next few years.

At a high level, Datadog is a cloud application observability and security platform. Security features include cloud and application security management and application vulnerability management. In addition to cloud security, our solutions include cloud service management, product analytics, and software security.

It is worth noting that the value of the cloud market is currently $560 billion. Furthermore, the market is expected to grow at a CAGR of 20% until 2027. This is a huge opportunity for players like his Datadog with a comprehensive platform. The company’s observability market is worth $51 billion in 2023, and its cloud security market is worth $21 billion.

From a financial perspective, Datadog reported a 27% year-over-year increase in 2023 revenue to $2.13 billion. It’s worth noting that with a free cash flow margin of 28%, Datadog ended the year with a $2.6 billion cash buffer. Therefore, we have sufficient financial flexibility to invest in growth and platform innovation.

On the date of publication, Faisal Humayun did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publication guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in credit research, equity research, and financial modeling. Faisal has written over 1,500 stock-specific articles with a focus on the technology, energy and commodity sectors.


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