Growing concerns about macro challenges and an impending recession are impacting enterprise IT spending. Nevertheless, spending on cybersecurity solutions is expected to be resilient given the rising number of cyberattacks amid the ongoing digital transition. According to Check Point Research, global cyberattacks increased 28% in the third quarter. With that in mind, we pitted CrowdStrike using the TipRanks Stock Comparison Tool (NASDAQ: CRWD), Palo Alto (Nasdaq: PANW), and Fortinet (Nasdaq: FTNT) against each other and pick the cybersecurity stocks that have the potential to produce the best returns.
Shares of CrowdStrike Holdings (CRWD)
The stock price of CrowdStrike, a leading endpoint security provider, plummeted after the company announced its third quarter earnings. Third Quarter 2023 (ending October 31, 2022) revenues increased 53% to $581 million and adjusted earnings per share (EPS) jumped 135% to $0.40 I was.
While third quarter revenue and earnings beat expectations, investors were disappointed as net new annual recurring revenue (ARR) and fourth quarter guidance were lower than expected. CrowdStrike noted that for smaller customers, macro challenges have led to longer sales cycles, with some larger customers opting for multiple phases of subscription start dates.
Macro factors may affect CrowdStrike’s near-term performance, but the company’s growing customer base and increasing engagement cannot be ignored. The company’s subscription customer base grew 44% to 21,146 at the end of the third quarter. In addition, 60% of subscription customers have adopted five or more modules as of the end of Q3 FY23, up from 55% in the same period last year.
What is the target price for CRWD shares?
Recently, Redburn Partners analyst Nina Marques began reporting on CrowdStrike’s stock with a Buy rating and a price target of $175. Marques calls CrowdStrike the leader in innovative cybersecurity and seeks to capture market share from traditional antivirus vendors..
While near-term expectations for CrowdStrike have been revised to reflect macro pressures, Marques feels the focus will return to structural tailwinds in the cybersecurity space.
CrowdStrike earned the Street’s Strong Buy consensus rating based on 31 byes and 2 holds. An average CRWD stock target of $180.26 implies a 52.1% upside potential. CRWD’s stock has plunged nearly 42% so far this year.
Palo Alto Networks (PANW) Stock
Palo Alto recently achieved a beat and raise quarter despite unfavorable macro conditions. In the company’s fiscal first quarter (ending October 31, 2022), revenue increased 25% to $1.6 billion and adjusted EPS jumped 51% to $0.83.
The company is experiencing strong demand for next-generation security (NGS) products such as Cortex, Prisma Cloud, Prisma SASE, and software firewalls. NGS’ annual recurring revenue (ARR) increased 67% to $2.11 billion in the first quarter of fiscal 2023.
Palo Alto remains optimistic about future growth and continues to win large customers. In the first quarter of fiscal year, the number of customers with bookings of $1 million or more increased 23% to 1,262 in the last four quarters.
Is Palo Alto Buy, Sell, or Hold?
Morgan Stanley analyst Hamza Fodderwala believes Palo Alto will “become the first cybersecurity company with a market capitalization of $100 billion, or nearly double its current share price within two years.” . Analysts’ optimism is based on the evolution of Palo Alto’s platform, cloud his security market leadership position, and improved profitability.
Fodderwala believes PANW stock is “ready for a revaluation” after a strong first quarter. Fodderwala maintained his buy rating on PANW stock and his $268 price target.
Wall Street has a strong buy consensus rating based on 26 buys and 3 holds. Palo Alto’s average price target of $219.93 suggests upside potential of nearly 36%. PANW shares are down about 13% year-to-date.
Fortinet (FTNT) Stock
Cybersecurity and networking solutions provider Fortinet’s adjusted EPS increased 65% in the third quarter to $0.33. Fortinet sales rose 33% to $1.41 billion.
FTNT’s stock price plunged as the company’s claims guidance fell short of expectations, despite better-than-expected sales and bottom-line earnings. The company expects fourth-quarter billings to range from $1.665 billion to $1.72 billion, versus analysts’ consensus forecast of $1.74 billion.
Nonetheless, the company expects $10 billion in claims and $8 billion in 2025, reflecting a three-year compound annual growth rate (CAGR) of 22% from the midpoint of its 2022 guidance, respectively. We are confident that we will reach our medium-term financial target of profitability.
Is Fortinet a Good Buy Now?
Following the third quarter print, BTIG analyst Gray Powell reiterated his buy rating on Fortinet stock, calling the third quarter results “solid.” But Powell cut his price target on FTNT shares from $80 to $62 because the fourth-quarter billing outlook was “disappointing” and bookings “could have improved.” I was.
Powell sees market growth in the network and SD-WAN market despite Fortinet ending the year with low range booked growth of 20% compared to the 42% growth reported in the second quarter. We remain positive about Fortinet’s chances of gaining share.
Fortinet’s strong buy consensus rating is underpinned by 16 buys and 1 pending rating. An average FTNT share price target of $65.59 implies a 22.3% upside potential. FTNT’s stock has fallen 22.3% so far this year.
Conclusion
Wall Street is very bullish on CrowdStrike, Palo Alto, and Fortinet, saying they will benefit from strong demand for cybersecurity solutions amid growing threats and continued digitization. I hope.
Analysts see CrowdStrike’s plunge as an opportunity to get better returns than Palo Alto and Fortinet stocks. CrowdStrike has a strong position in the endpoint security market and is expected to grow at a faster rate than Palo Alto and Fortinet.
Disclosure
