If there was ever an opportunistic time to warm up to cybersecurity stocks, it could be now. The three largest exchange-traded funds (ETFs) specializing in cybersecurity investments are all trading lower in recent months, down between 3% and 24% over the past year. The market has moved 14% higher in that time.
The world isn't getting any safer online. Demand continues to be strong, and there's plenty of that growth to go around. I believe that SentinelOne (S 2.68%), CrowdStrike (CRWD 0.13%), and Palo Alto Networks (PANW +1.90%) are the top three cybersecurity stocks to buy this month. Let's take a closer look at three companies that are still posting double-digit top-line growth despite the market's recent lack of interest in playing along with cybersecurity ETFs.
NYSE: S
Key Data Points
1. SentinelOne
With trailing revenue growth of 24%, SentinelOne is the fastest-growing player on this list over the past year. Surprisingly, it's also the cybersecurity stock fetching the lowest revenue multiple. With a cash-heavy balance sheet trimming its market cap of $4.5 billion to an enterprise value of $3.9 billion, you can buy SentinelOne at an enterprise value that is just 4 times trailing revenue. Compare that to CrowdStrike and Palo Alto Networks, which trade at trailing multiples of 21 and 11, respectively.
SentinelOne has been an early leader in integrating AI into its business. SentinelOne's Singularity platform leans on AI to detect, prevent, and respond to cyberattacks. Despite its rising business, SentinelOne is trading at barely a third of the 2021 initial public offering (IPO) price of $35.
There's no free lunch. SentinelOne has a long history of losing money and the weakest margins -- by far -- among these three cybersecurity stocks. However, after its share price was cut nearly in half over the past year, it's a strong candidate for the strongest turnaround. At the very least, its growing business, valuation discount to peers, and early AI leadership make it a potential buyout opportunity.
Image source: Getty Images.
2. CrowdStrike Holdings
CrowdStrike was a market darling until a headline-grabbing outage in the summer of 2024 made it famous for all the wrong reasons. Remember that late July day two years ago, when many hospitals, airlines, banks, and other businesses suffered critical downtime due to a tech snafu? That was a CrowdStrike update that wreaked havoc.
The good news is that CrowdStrike enters this new trading week trading 50% higher than its close of $263.91 the day that its popular suite of Falcon cloud-based cybersecurity solutions notoriously faltered. Year-over-year revenue growth has decelerated for six consecutive fiscal quarters, but it's not all that different than the general slowing for the necessary but maturing industry. In short, CrowdStrike's reputation didn't take a hit despite the notoriety. Its 22% trailing revenue growth over the past year is decent.
3. Palo Alto Networks
Bringing up the rear, only in terms of top-line growth, is Palo Alto Networks. Its trailing revenue, rising 15% over the past year, may not seem like much, lagging SentinelOne and CrowdStrike. It has now rattled off eight consecutive quarters in which it can't break out of the teens when it comes to top-line gains.
With a market cap of $111 billion, Palo Alto stock is the most valuable player in this space. It's also the only one of the three on this list that has been consistently profitable on a reported basis, with double-digit net margins to boot. If you want a cybersecurity play in February, going for the top dog is a good place to start.
