5 Cybersecurity Stocks to Watch

As cyberattackers become more sophisticated, more innovative solutions will be needed to deal with the growing threat of hacks. Here is a collection of stocks poised to benefit from the growing recognition of the importance of cybersecurity.

• Okta launches Okta AI, designed to help enterprises identify threats in real time.
• Tenable has acquired cloud security platform provider Ermetic for $265m.
• Palo Alto Networks opened its UK headquarters in London last week.

Darktrace

The sales commission stock

Darktrace [DARK.L] warned in its fiscal year 2023 results in early September that fiscal 2024 will be a “tale of two halves”. The company cut its 2024 EBITDA guidance from 22% to a range of 17–19%, attributing the reduction to changes in accounting and how sales commissions are structured. Following an initial pullback in the share price, the stock is down 3.6% in the past month. Darktrace Chief Financial Officer Cathy Graham told the Evening Standard that the accounting changes will ultimately lead to higher fees being paid upfront. “Fundamentally there is an underlying improvement in the business”, said Graham.

Okta

The AI stock

Okta [OKTA] CEO Todd McKinnon believes every company should prepare for artificial intelligence (AI). McKinnon told Yahoo Finance last week that AI “makes several of our existing products more valuable and more powerful for customers, and also makes entirely new products possible”. He was speaking following an Okta conference at which it unveiled a suite of new tools, including Okta AI, which will allow users to identify threats in real time and better protect themselves from cyberattacks.

Tenable

The cloud security stock

Tenable [TENB] announced last week that it had completed its $265m cash-and-stock acquisition of Ermetic, which provides security for Amazon [AMZN] Web Services, Microsoft [MSFT] Azure and Google [GOOGL] Cloud. Tenable Chairman and CEO Amit Yoran said in a statement that the combination of the two companies would improve “capabilities for cloud environments, delivered through an elegant user experience that minimises complexity and speeds adoption”. It’ll also help Tenable customers to consolidate and simplify their cloud security, reducing costs in the process.

Palo Alto Networks

The UK expansion stock

Palo Alto Networks [PANW] opened its new UK headquarters in London last week, a move that is set to create 485 jobs over the next five years. “As the UK works towards achieving the government’s ambition of becoming a technology and scientific superpower by 2030, cybersecurity will be critical to its success,” said Helmut Reisinger, Palo Alto Networks’ CEO of EMEA and LATAM, in a statement. The company first opened an office in the UK in 2009.

SentinelOne

The risk management stock

SentinelOne [S] has partnered with personal insurance provider Chubb [CB] to improve cybersecurity management. Chubb’s policyholders who bring in at least $100m in revenue will be able to share their enterprise “health assessment or security posture” data with the company via SentinelOne’s endpoint protection. This will “help them take informed action to protect their business from potentially devastating threats today and tomorrow,” said SentinelOne Chief Customer Officer Eran Ashkenazi in a statement.

Another Way to Invest in Cybersecurity

The Global X Cybersecurity ETF

ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.

The Global X Cybersecurity ETF [BUG], which holds all five stocks, is effectively a pure-play on the information technology (IT) sector, which accounts for 95.9% of the portfolio as of 30 September, with communication services accounting for the other 4.1%. The fund is up 17.25% year-to-date.

The First Trust Nasdaq Cybersecurity ETF [CIBR] also holds all five stocks. As of 6 October, the fund has allocated 54.2% of its portfolio to software, 15.3% to IT services and 13.1% to communication equipment. Professional services (8.9%), semiconductors (5.6%) and aerospace and defence (2.9%) follow. The fund is up 18.6% year-to-date.