Many businesses have struggled with economic headwinds over the past year, even cybersecurity leaders CrowdStrike (CRWD 2.03%) and Okta (OKTA -0.69%). Meanwhile, cybercriminals continued to inflict damage on organizations around the world.
Global cyberattacks increased 38% in 2022, according to Check Point Research, and attack volume reached an all-time high in the fourth quarter. Unfortunately, that trend will likely intensify in the coming years as businesses become more dependent on digital systems, but there is a silver lining for investors.
CrowdStrike and Okta are in an ideal spot to benefit from the growing need for effective cybersecurity, and growth in both businesses should reaccelerate on the heels of an economic recovery.
CrowdStrike: A leader in multiple cybersecurity markets
CrowdStrike stock is down 68% from its high, even though the company delivered another round of impressive financial results in the third quarter. Its customer count climbed 44% to 21,146, revenue soared 53% to $581 million, and cash from operations rose 53% to $243 million.
So why is the stock down? Management said macroeconomic headwinds have caused sales cycles to elongate, and delayed purchases will likely lead to slower revenue growth in the coming quarters. Some investors see that as a deal breaker, but it has actually created a good buying opportunity.
Economic headwinds are a temporary problem, but cybersecurity will only become more crucial in the years ahead, and CrowdStrike is in an exceptionally good position to capitalize on that trend: The company is a leader in several industry verticals, including endpoint security, managed detection and response, cloud-native application protection, and threat intelligence.
That success stems from its broad portfolio, unrivaled artificial intelligence (AI) engine, and unique platform architecture that allows its software to be deployed without a system reboot.
In a nutshell, CrowdStrike makes it possible for businesses to replace complex patchworks of individual cybersecurity products with a single platform, without interrupting their operations, and its AI-powered software offers detection capabilities that it says "far surpass other security solutions on the market."
With that in mind, the company puts its addressable market at $98 billion in 2025, leaving plenty of room for growth. Yet shares currently trade at 10.8 times sales, the cheapest valuation since its initial public offering in 2019 and a very reasonable price for a company that is growing revenue as quickly as CrowdStrike. That's why investors should buy a few shares of this growth stock before the next bull market.
Okta: A leader in identity and access management
Okta stock is down 77% from its high due to a combination of economic headwinds and integration challenges following the 2021 acquisition of Auth0. Those problems led to a disappointing third-quarter financial report.
Revenue rose 37% to $481 million -- a meaningful deceleration from 61% growth in the prior year -- and cash from operations dropped to $10 million, down from $37 million.
That said, investors still have good reason to be bullish on Okta. The company specializes in identity and access management (IAM), a branch of cybersecurity that seeks to ensure only the right users and devices can access the appropriate applications and systems.
Okta streamlines adoption with over 7,000 pre-built integrations, the broadest set of integrations on the market. And its infrastructure-neutral strategy gives it an edge over Microsoft, a company with a clear incentive to favor its own cloud infrastructure.
The company has taken steps to resolve the Auth0 integration issues. It recently unveiled a simplified go-to-market strategy that consolidates its IAM software into two distinct cloud platforms: a Workforce Identity Cloud powered by Okta technology, and a Customer Identity Cloud powered by Auth0 technology. Prior to that restructuring, Okta offered two different customer identity products, which created confusion for the sales team.
It has the most comprehensive IAM platform on the market, offering more integrations and covering more use cases than any other vendor. In November, IT research company Gartner recognized Okta as an industry leader for the sixth consecutive year, noting that the company obtained the highest score among all vendors for product capabilities, customer experience, and marketing execution.
With that in mind, Okta values its addressable market at $80 billion, leaving a long runway for growth, and shares currently trade at 6.2 times sales -- an absolute bargain compared to the three-year average of 26.6 times sales. That's why investors should buy a few shares of this stock today.
