3 Top Cybersecurity Stocks to Buy in February

Cybersecurity attacks are becoming more frequent and more sophisticated. In 2020 alone, numerous high-profile companies, including Twitter, Marriott, and SolarWinds, were successfully targeted by hackers. Not surprisingly, cybersecurity has been a hot topic lately, as enterprises seek to ensure their data and devices are protected.

According to Grand View Research, the cybersecurity market is expected to expand 10% per year through 2027, creating a big opportunity for investors. Here's why CrowdStrike (CRWD -1.35%), Zscaler (ZS -1.37%), and Microsoft (MSFT -0.78%) look like smart ways to invest in that trend.

Let's find out a bit more about these three top cybersecurity stocks and why you might want to invest in them.

Image Source: Getty Images

1. CrowdStrike: Endpoint and workload protection

CrowdStrike Falcon is a cloud-based platform that protects both physical and virtualized endpoints: everything from desktops, mobile devices, and virtual machines to workloads running in cloud data centers. This helps clients respond to cyberattacks quickly, stopping threats before they become costly breaches.

Compared to many vendors, CrowdStrike has a more modern solution, which translates into cost efficiencies and better protection for clients. For instance, clients access the Falcon platform through the cloud, meaning they don't need to purchase costly on-premise hardware. This simplifies deployment and reduces operational expenses, making CrowdStrike cheaper and less complex than on-premise solutions. Additionally, CrowdStrike's cloud-native architecture enables data collection on a massive scale. This powers the company's proprietary Threat Graph, which applies artificial intelligence and other sophisticated detection techniques to the data, generating insights that help predict and prevent even the most advanced attacks.

CrowdStrike's strategy has earned the company a reputation for industry-leading threat protection. In fact, Forrester recently recognized CrowdStrike as a leader in the market for endpoint detection and response solutions, and CrowdStrike received the highest ratings in Gartner's latest Peer Insights report. These accolades have helped the company scale quickly, growing customers and revenue at an incredible pace.

Data source: CrowdStrike SEC filings. TTM = trailing 12 months.

In the coming years, as cyberattacks become increasingly complex and costly, CrowdStrike's ability to keep clients ahead of adversaries should make the company a long-term winner.

2. Zscaler: Cloud and network security

Zscaler takes a slightly different approach, focusing on cloud and network security rather than endpoint protection. However, the company's motives are the same: Cloud computing and software-as-a-service (SaaS) models are now mainstream, meaning organizations don't control the infrastructure they use on a daily basis. Moreover, in the wake of the coronavirus pandemic, more people are working remotely, meaning firewalls set around corporate perimeters are no longer effective.

Zscaler securely connects clients to internally and externally managed applications, as well as the open internet, by routing all traffic through the nearest of Zscaler's 150+ global data centers. This allows Zscaler's platform to inspect every byte of traffic and enforce security policies set by corporate administrators. This extends protection beyond the corporate perimeter, allowing employees to work safely from any location, on any network, using any device.

Zscaler's market-leading solution effectively addresses the needs of modern enterprises. As a result, the company has seen incredible growth in recent years.

Source: Zscaler SEC filings.

Network architectures like Zscaler's -- referred to as SASE (secure access service edge) -- are expected to become much more prevalent in the coming years. In fact, Gartner analysts estimate that 40% of enterprises will have plans in place to adopt SASE architecture by 2024. By contrast, only 1% of businesses had adopted SASE models in 2018. That wide-scale adoption should be a catalyst for Zscaler in the coming years.

3. Microsoft: The software giant

It's easy to overlook Microsoft as a cybersecurity provider given the company's impressive product portfolio, which includes market-leading productivity software like Office 365 and a thriving cloud computing business in Microsoft Azure.

However, Microsoft has a broad array of security solutions, from identity and access management protection to extended detection and response. In fact, Forrester recently recognized Microsoft (alongside CrowdStrike) as a leader in the endpoint detection and response market.

In the last year alone, the company's security business has grown quickly. According to Gartner, Microsoft Defender is now the market leader in terms of the number of protected business endpoints. And the company recently announced that security revenue exceeded $10 billion over the last 12 months, representing 40% growth in the past year.

What's more, Microsoft has several advantages that CrowdStrike and Zscaler do not. First, the company is considerably larger and has much deeper pockets, which means Microsoft can invest more aggressively in its operations. Second, Microsoft's brand name is known and trusted around the world. Finally, as the distributor of Windows, Microsoft can integrate its security products with the most popular operating system in the world. This makes things very simple for clients, and simple solutions are typically long-term winners.