3 Cybersecurity Stocks to Buy as Digital Threats Continue to Grow

Stocks to buy

While seemingly everyone loves talking about the dramatic advancements in technology in recent years, investors ought to consider the caboose of this freight train: cybersecurity stocks. No, it’s not the sexiest idea to bring to the table. But where there’s smoke, there’s fire.

What on earth do I mean by that? Basically, as innovation improves, so too does the means of exploiting such advancements for nefarious purposes. Just look at what happened to Clorox (NYSE:CLX) last year. A consumer goods giant, Clorox shares stumbled as news broke about the extensive damage the company incurred due to a cyberattack. So, that’s a clear catalyst for cybersecurity stocks.

The other point is that the industry offers a viable upside narrative. According to The Insight Partners, the global cybersecurity market could be worth $660.67 billion by 2030. If so, that would represent a compound annual growth rate (CAGR) of 15.9% from 2022 to 2030.

With so much at stake, digital protection could be profitable. On that note, below are cybersecurity stocks to consider.

IBM (IBM)

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A legacy tech juggernaut that needs no introduction, IBM (NYSE:IBM) might not be everyone’s idea for cybersecurity stocks. However, the company has its hands on multiple sectors. So, if the company’s enterprise-level cybersecurity business doesn’t quite pan out, Big Blue offers alternative avenues of success. With circumstances still ambiguous, this flexibility could be valuable.

For the subject at hand, IBM provides businesses with advanced cybersecurity solutions powered by artificial intelligence. From threat intelligence protocols to cloud security solutions, the tech giant provides end-to-end coverage. And if the worst-case scenario occurs – that of ransomware attacks – the company also brings many solutions, including a quicker-recovery protocol following a breach.

Another benefit for IBM is its passive income. Right now, Big Blue offers a big forward dividend yield of 4%, well above the tech sector’s average yield of 1.37%. To be fair, analysts don’t particularly like the opportunity, rating shares a consensus hold. Still, this assessment undercuts the trailing-six-month performance of over 24%.

Zscaler (ZS)

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Based in San Jose, California, Zscaler (NASDAQ:ZS) is a cloud security specialist. Per its website, the company delivers zero-trust network access and security service edge solutions. In simple terms, Zscaler functions as a secure gateway between its clients and the internet. Along the way, the company’s security protocols intercept and inspect all outbound and inbound traffic.

Fundamentally, Zscaler is one of the most relevant ideas among cybersecurity stocks due to the underlying continuous trust verification. When clients sign on to the company’s services, users and devices are authenticated and authorized prior to receiving access to critical resources. Moreover, Zscaler’s systems enable threat detection and prevention at the “perimeter,” so to speak.

Basically, with malicious content being identified and blocked at the gateway, the system prevents conflagration. To be sure, investors love ZS, gaining over 103% in the past 52 weeks. Still, because of the performance, analysts – who rate shares a strong buy – are hesitant with their average price target.

Still, because of the company’s viability, the max-side target of $290 seems reasonable.

Cisco Systems (CSCO)

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A multinational digital communications firm, Cisco Systems (NASDAQ:CSCO) isn’t exactly a pure-play idea for cybersecurity stocks. However, because of its acumen in the broader telecommunication space, it’s only natural that digital protection has been interwoven into its business. As well, the company has added to its corporate umbrella to deliver more relevancy to the cybersecurity realm.

In particular, in 2018, Cisco acquired Duo Security for $2.35 billion. Fundamentally, the acquisition was driven by the desire to advance zero-trust protocols. This is a framework that – as mentioned earlier – assumes that no entity should be afforded automatic trust within a network. Rather, zero-trust protocols enable continuous verification and authorization before granting access to protected resources.

Moving forward, zero trust will likely be incredibly valuable given the consequences of getting things wrong. Another aspect that makes CSCO one of the enticing cybersecurity stocks is the forward yield of 3.1%. Combined with a low payout ratio of 38.79%, investors can sleep easy with Cisco, knowing that it’s protecting enterprises and investment portfolios.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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