The rapid transition to the cloud and the growing adoption of artificial intelligence have reinforced the need for cybersecurity to prevent rapidly increasing cyber attacks. Moreover, the recently reported results of several cybersecurity companies reveal that the sector is more resilient compared to the other tech categories amid persistent macro challenges. We used TipRanks’ Stock Comparison Tool to place Fortinet (NASDAQ:FTNT), CrowdStrike (NASDAQ:CRWD), and Palo Alto (NASDAQ:PANW) against each other to pick the most attractive cybersecurity stock.
Fortinet (NASDAQ:FTNT)
Earlier this month, cybersecurity and networking solutions provider Fortinet reported better-than-anticipated first-quarter results. Revenue increased 32% year-over-year to $1.26 billion and adjusted EPS grew 79% to $0.34.
Billings, a key metric of future revenue, came in at $1.5 billion, up 30% year-over-year. It’s worth noting that Secure SD-WAN (software-defined wide-area network) and Operational Technology security bookings once again accounted for more than 25% of FTNT’s total bookings in the quarter.
The company is confident about achieving its 2025 billings target of $10 billion while delivering an annual adjusted operating margin of at least 25% for each of the next three years.
What is the Target Price for Fortinet?
Last week, Goldman Sachs analyst Gabriela Borges noted the 3% decline in FTNT shares after Microsoft (NASDAQ:MSFT) reported a cyberattack on the U.S. critical infrastructure by a threat actor called Volt Typhoon. Microsoft mentioned Fortinet’s “internet-facing FortiGuard devices” that were targeted by Volt Typhoon to gain initial access to the network.
Following conversations with two Fortinet distributors, Borges expects minimal impact on the company’s pipeline or win rates due to this matter. She reiterated a Buy rating on FTNT stock with a price target of $77.
Wall Street’s Moderate Buy consensus rating on Fortinet is based on 15 Buys and six Holds. Shares of Fortinet have advanced over 39% year-to-date. The average price target of $75.90 implies 11.4% upside potential.
CrowdStrike (NASDAQ:CRWD)
Shares of CrowdStrike, a leading endpoint security provider, declined last week despite better-than-anticipated first-quarter results and upgraded guidance. The decline in the stock was attributed to its premium valuation, given the slowing growth rate.
CrowdStrike’s Q1 FY24 (ended April 30, 2023) revenue increased 42% to nearly $693 million. While the top line exceeded expectations, the growth rate slowed down compared to 48% in Q4 FY23 and 61% in Q1 FY23. The company expects its fiscal second-quarter revenue in the range of 34% to 36%.
CrowdStrike closed over 50% more deals involving eight or more modules in Q1 FY24 compared to the prior-year quarter and highlighted the increasing customer demand for consolidation using the company’s Falcon platform. The company is confident about its business in the second half of the year, based on a solid Q2 pipeline and momentum with large consolidation deals.
Is CrowdStrike a Buy, Sell, or Hold?
Last week, Goldman Sachs’ Borges increased the price target for CrowdStrike to $167 from $159 and maintained a Buy rating. Borges pointed out that while Q1 earnings beat estimates, billings missed expectations. Additionally, management noted that macro dynamics worsened in the quarter.
Nonetheless, Borges remains “constructive” on the stock, adding that while the next-gen endpoint product cycle is further along, the industry model of her firm also suggests that there is still a possibility of CrowdStrike taking additional market share in the endpoint security space.
Wall Street’s Strong Buy consensus rating on CrowdStrike stock is based on 33 Buys and three Holds. The average price target of $173.85 indicates 15% upside. Shares have jumped almost 44% since the start of this year.
Palo Alto Networks (NASDAQ:PANW)
Palo Alto’s Q3 FY23 adjusted EPS surged 83% to $1.10, exceeding analysts’ estimate of $0.93. The impressive rise in earnings was driven by higher revenue and a 320 basis points jump in adjusted gross margin, fueled by a higher software mix, reduced supply chain costs, and the company’s efficiency measures. Revenue increased 24% to $1.7 billion and was in line with expectations. Billings rose 26% to $2.3 billion.
Further, management increased its full-year growth estimates for revenue, billings, and earnings. The company anticipates its Q4 FY23 revenue growth between 25% and 27%. Nevertheless, the company cautioned that macro trends of cautious spending by enterprises, deal scrutiny, and cost consciousness persist.
Is Palo Alto a Good Stock to Buy?
On May 24, UBS analyst Roger Boyd raised his price target for Palo Alto to $220 from $200 and reiterated a Hold rating. Boyd said that the company reported “good” results, highlighting the billings growth in the quarter and a modest increase to the Q4 billings outlook.
With 28 Buys and one Hold, Palo Alto earns a Strong Buy consensus rating. The average price target of $239 implies 10% upside. Shares have rallied about 56% year-to-date.
Conclusion
Wall Street is more bullish on CrowdStrike and Palo Alto than Fortinet. They estimate a slightly higher upside in CRWD shares. As per TipRanks’ Smart Score System, CrowdStrike scores a “Perfect 10,” implying the stock is capable of outperforming the broader market over the long term.
According to TipRanks’ Hedge Fund Trading Activity Tool, hedge funds have a Very Positive signal on CRWD. Hedge funds increased their holdings in CRWD by 1.1 million shares last quarter.
