Considering the increasing vulnerability of our online activity, snapping up cheap cybersecurity stocks can be a wise move for investors. We use computers, smartphones and other devices to communicate with people online, stay up to date on the latest information and find things to do. Although these devices give us many opportunities and choices, it leaves us more vulnerable than ever to cyberattacks.
Cyber hacking is a lucrative business model where criminals steal information such as email addresses and credit card numbers. Recent research from Check Point (NASDAQ:CHKP) showed that global cyberattacks increased by 38% in 2022.
Not only does this present a risk for consumers, but these attacks can decimate small businesses and corporations. The damaged trust, expensive fees and lost data can take some companies out of business.
Many small businesses cannot survive a cyberattack, but cybersecurity software can help. These resources help businesses and consumers stay safe online and investors can benefit. You may want to consider snapping up these three cheap cybersecurity stocks.
Although cybersecurity is a growing industry that is critical for many companies, many cheap cybersecurity stocks like Fortinet (NASDAQ:FTNT) did not perform well in their recent earnings reports.
Fortinet shares plunged by 15% in the after-hours after reporting 25.5% year-over-year (YOY) revenue growth and a 36.3% YOY growth in operating income.
While these numbers are good, Fortinet warned about deal delays and lowered its guidance for the year. Fortinet previously called for fiscal year 2023 revenue between $5.425-$5.485 billion. The company lowered its revenue guidance to $5.35-$5.45 billion but raised its diluted non-GAAP net income per share guidance to $1.49-$1.53. That net income per share statistic is based on earnings attributable to Fortinet.
This change represents a $55 million drop in guidance at the midpoints of a 1% drop. Investors weren’t too enthused about holding onto a stock with a 62 P/E ratio that lowered its guidance. However, reducing revenue guidance by 1% at the midpoints doesn’t sound like something that should cause a stock to fall by 15% in the after-hours.
The short-term thesis is shaky, but the company’s long-term prospects are still intact and look promising. Shares were up by over 400% over the past five years before the earnings report came out. Investors can use short-term headwinds to get shares at a discount.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) shares tumbled by 6% in the after-hours in response to Fortinet’s earnings report. Fortinet’s soft guidance has some investors worried Palo Alto Networks could endure the same fate.
While slowdowns can be expected from several cybersecurity companies, the long-term thesis remains strong. Investors who see the long-term picture may have a buying opportunity as some people sell their shares.
Palo Alto Networks has been a reliable stock for patient investors. PANW stock has more than tripled over the past five years. The company has exhibited strong top- and bottom-line revenue growth in recent quarters.
Based on investors’ reactions to Fortinet’s earnings, it seems like a foregone conclusion that Palo Alto Networks’ earnings won’t please investors. However, any positive surprise in earnings can send shares back to where they were. If the expected soft guidance dampens the mood, investors may want to accumulate shares and wait for a turnaround.
Not everything has been doom and gloom for cybersecurity stocks this past week. Qualys (NASDAQ:QLYS) shares surged in the after-hours by over 7% on good earnings.
Qualys lowered its full-year guidance from $553-$557 million to $553-$555 million but raised 2023 GAAP EPS guidance to $3.07-$3.22. Qualys has a more reasonable 48 P/E ratio relative to the other cheap cybersecurity stocks on this list.
Management was optimistic about the company’s second-quarter performance and its long-term prospects. Qualys has emerged as a top choice as a cybersecurity risk management platform. A high net income growth rate can enable a lower P/E ratio in the future and can reward long-term investors.