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Cybersecurity stocks: The next big winners in the digital age?

Cybersecurity stocks have outperformed the broader market in recent years, with the Nasdaq Cybersecurity Index returning 21.26% year to date (as of 14 Nov 2023), compared to a return of 15.36% for the S&P 500 index over the similar period. This is likely due to several factors, including the increasing digitalization of businesses and governments, the growing sophistication of cyberattacks, and the increasing awareness of cybersecurity risks among businesses and consumers.

Consider paying attention to cybersecurity stocks for these three compelling reasons:

1. Cybersecurity is a growing industry

The global cybersecurity market is expected to grow from $230.4 billion in 2023 to $338.5 billion by 2028, at a CAGR of 10.3% (Statista). This growth is being driven by several factors, including:

The increasing digitalization of businesses and governments: As more and more businesses and governments move their data and applications to the cloud, the risk of cyberattacks increases. This is driving demand for cloud-based cybersecurity solutions.

The growth of the Internet of Things (IoT): The IoT is connecting billions of devices to the internet. This creates a vast new attack surface for cybercriminals. As a result, businesses are investing heavily in IoT security solutions.

The increasing sophistication of cyberattacks: Cybercriminals are constantly developing new and sophisticated attacks. This means that businesses need to invest in cybersecurity solutions that can keep up with the latest threats.

2. Cybersecurity is a critical business need

In today's digital world, cybersecurity is essential for businesses of all sizes. Businesses need to protect their data, their systems, and their customers from cyberattacks. This is driving strong demand for cybersecurity products and services.

According to a recent survey by IBM, the average cost of a data breach is now $4.35 million. This is a significant increase from the previous year, and it highlights the importance of cybersecurity for businesses.

3. Cybersecurity stocks are well-positioned for the future

The cybersecurity industry is well-positioned for continued growth in the future. This is due to a number of factors, including the increasing digitalization of businesses and governments, the growing sophistication of cyberattacks, and the increasing awareness of cybersecurity risks among businesses and consumers.

Cybersecurity stocks can be a good investment for investors who are looking for long-term growth.

We have created a list of leading companies in the sector to watch.

Palo Alto Networks – Market capitalization USD 79.46B

PANW has been one of the top performers in the cybersecurity sector, with its stock price increasing by 84.64% in 2023. This growth is likely due to the company's strong track record of innovation and its focus on next-generation security solutions.

CrowdStrike Holdings – Market capitalization USD 47.99B

CRWD has also been a strong performer, with its stock price increasing by 94.58% in 2023. CrowdStrike is a leader in the endpoint security market, and its products are in high demand as businesses look to protect their devices from cyberattacks.

SentinelOne – Market capitalization USD 4.64B

S has emerged as the leading cybersecurity stock, witnessing a notable 10.16% surge in its stock price in 2023. Despite being a relatively recent entrant, SentinelOne has swiftly established itself as a company renowned for its inventive security solutions.

Fortinet – Market capitalization USD 38.63B

FTNT stands as a firmly established cybersecurity firm, demonstrating consistent performance in recent years. Fortinet has observed a 3.67% uptick in its stock price in 2023, positioning the company favorably to capitalize on the sustained expansion of the cybersecurity market.

Zscaler – Market capitalization USD 26.22B

ZS operates as a cybersecurity company in the cloud domain and has experienced a surge in its stock price over the past few years. In 2023, Zscaler has witnessed an impressive 61.69% increase in its stock price, positioning the company strategically to leverage the ongoing transition to cloud computing.

*Market Capitalization figures correct as of 14 Nov 2023.

When determining the best cybersecurity stocks, it's crucial to recognize that companies native to the cloud possess an inherent competitive edge due to their utilization of cutting-edge software technology.   Monitoring cloud-based operations, along with overseeing web content and applications, is becoming increasingly vital for a company's online security.

In one’s investment approach, investors may wish to maintain a focus on the long-term potential of these rapidly growing companies, as individual stock prices can exhibit significant volatility on a monthly and yearly basis. The technology safeguarding the digital realm is rapidly advancing and expanding, ensuring that cybersecurity firms stand to reap corresponding financial rewards.

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