In early 2021, KPMG conducted an interesting survey. The accounting giant approached 500 CEOs of the world's largest companies and asked them what they perceived as the most significant threat to their organizations. One answer topped the list by a solid margin: cybersecurity risk.
It's a scary thought for company leaders, who are tasked with protecting highly valuable assets in cyberspace as their organizations rapidly transition into the digital realm. Customer data is among the most sought-after by cyber hackers, and breaches can be a financial and reputational disaster for any company.
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That's why many organizations are taking a more proactive approach to cybersecurity, enlisting advanced new tools like threat detection to stay one step ahead of attackers. These two stocks are among the leading developers of this technology, and owning them could give your portfolio a boost as demand soars.
The case for Tenable
Tenable Holdings (TENB -2.00%) is dominating the threat detection and vulnerability management subset of the cybersecurity industry. It's currently ranked No. 1 in adoption, with its Nessus platform downloaded over 2 million times and used across 30,000 organizations.
The U.S. government maintains a database of known common vulnerabilities and exposures (CVEs) in cyberspace, with over 182,000 threats currently listed. Tenable protects its customers against over 68,000 of them, topping all of its competitors, and it's also ranked highest for accuracy with the lowest rate of false-positive detections.
In light of the rapidly evolving threat landscape, 2021 was an incredibly strong year for Tenable. The company experienced particularly robust growth among its highest-spending customers, highlighting the increasing importance of cybersecurity in large organizations.
Tenable's revenue topped $541 million for the 2021 full year, representing a compound annual growth rate of 34% since 2016. But over that same stretch of five years, its customer base that spends $100,000 or more annually has soared 54% per year, now sitting at 1,095 companies.
Investors might also be encouraged that none of the Wall Street analysts covering Tenable stock recommends selling it -- in fact, 15 have a buy rating, and one has an overweight rating. And while the Nasdaq-100 technology index is down 21% so far this year, Tenable stock is outperforming with a decline of just 10%. This could be interpreted as investors feeling more comfortable holding Tenable compared to having exposure to the broader market.
While the recent market sell-off is a buying opportunity for a stock like Tenable, it's important to make purchases with the long term in mind, as history proves that's the most certain way to generate positive returns. And as the risk of cyber attacks continues to soar, demand for Tenable's security tools will only grow over time.
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The case for CrowdStrike
Like Tenable, CrowdStrike Holdings (CRWD -1.79%) is also outperforming the tech index, with a decline of just 7.6% in 2022 so far. The company is an endpoint protection specialist, meaning it focuses on securing devices used within organizations, whether they're computers, laptops, or mobile devices. Since more employees are now working remotely, there is a renewed vulnerability associated with accessing company networks.
CrowdStrike's flagship Falcon platform operates in the cloud, protecting the organization's network from malware and other threats, using both defensive measures and threat hunting technology. Falcon proactively searches for malicious programs that might have slipped through a particular endpoint undetected, and potentially eliminates the threat before it causes damage to the broader network.
As revealed in its recent fiscal 2022 full-year earnings report, CrowdStrike now serves 16,325 customers. That figure has soared 548% in just the last three years, from 2,516 customers in fiscal 2019. Over the same period of time, the company's full-year revenue has grown from $249 million to $1.45 billion.
But revenue growth isn't just coming from new customers. CrowdStrike's existing clients tend to spend an increasing amount of money once they're on board. In fiscal 2022, 69% of them used four or more modules, compared to 63% in fiscal 2021, which highlights how the threat landscape is expanding, prompting organizations to adopt a broader suite of tools.
CrowdStrike is also popular on Wall Street, with a consensus buy rating among the 30 analysts covering the stock, none of whom recommends selling it. The company's strong fiscal 2023 guidance might have something to do with that, since it expects to generate as much as $2.16 billion in revenue, representing 48% growth compared to fiscal 2022.
But that might just be the beginning. With some estimates suggesting the cybersecurity industry could be valued at $372 billion annually by 2028, CrowdStrike has an enormous runway for growth in the coming years.
