My Top 3 Cyber Protection Firms

With the world being so chaotic and volatile, there has never been a better time to invest in AI-infused cybersecurity stocks.

Global corporations are falling over themselves to sign up for the latest cyber defense. These contracts are the gold standard, and the increase is helping cyber defense make a name for itself.

Even though margins are starting to get squeezed in many sub-sectors of tech, tech firms aren’t skimping on defense protection.

These are three of my top picks in the cybersecurity area, and readers would do well to sprinkle of good dose of these companies into their tech portfolio.

 

1. Palo Alto Networks

Palo Alto Networks (PANW) is in the midst of a transformation from being largely a provider of next-generation firewalls to becoming a comprehensive cybersecurity platform. Last year, it embarked on a new “platformization” strategy where it stopped selling new point solutions and began consolidating customers onto one of its three main cybersecurity platforms. To do this, it gave away some of its services for free to entice customers to ditch disparate point solutions and centralize on its platforms.

Thus far, the strategy appears to be working, with 1,150 of its top 5,000 customers now using one of its platforms. It hopes to have 2,500 to 3,500 platformization customers by fiscal year 2030. Its main platform is network security, but it has also been seeing a lot of growth coming from its threat detection and response solution, Cortex, and its cloud security solution, Prisma Cloud.

I executed a deep-in-the-money call spread in PANW after the stock sold off on the earnings call. I am highly excited about the future of this cybersecurity stock. 

 

2. CrowdStrike

CrowdStrike (CRWD) is another cybersecurity company that should benefit from the trend of companies looking to consolidate their cybersecurity needs onto a single platform. The company is best known as the leader in endpoint security, which is the protection of devices connected to a network, such as a smartphone or laptop. In fact, it is regularly at the top of Gartner’s rankings for best endpoint security.

The company offers a comprehensive suite of cybersecurity protection, including threat intelligence, zero trust, logscale SIEM (log management and threat detections), and cloud security. And its flexible licensing and procurement service, Falcon Flex, is helping drive adoption of its modules.

Falcon Flex gives customers the flexibility to quickly deploy CrowdStrike solutions when and where they need them. Last quarter, 67% of CrowdStrike’s customers deployed five or more of its modules, while 21% used eight or more.

 

3. Zscaler

Zscaler (ZS) is a leader in zero-trust security, a model based on the principle that no user or device should be trusted. Instead, access to applications and data must be continuously verified, authorized, and revalidated to ensure security at every step.

Zero trust is becoming an increasingly important part of the cybersecurity landscape, and the company has been doing a great job of upselling its customers to new zero-trust systems. These include its Zscaler Private Access, which is being used to replace virtual private networks (VPNs), including within the federal government. Other products gaining traction include Zscaler Digital Experience, Zero Trust for Branch, and Cloud.

It has also moved into data security to help prevent data loss in public AI apps. Last quarter, it saw a 40% increase in annual contract value for its data security products.