In 2013 and into 2014, the absolute hottest subsector in the technology world was the security software group, and stocks soared to incredible heights on the hype and interest. But like all overhyped areas, when the air came out of the balloon, the stocks were absolutely hammered, and some still haven’t recovered. There is, however, one huge difference between this and other tech bubbles. Cybersecurity is more critical now and going forward than ever before, and some of the top companies remain cheap.

In a new research report, Stifel analysts recap their attendance at the Gartner Security and Risk Management Summit 2017, and one thing seems clear: Demand in almost every area of cybersecurity is strong, and the public cloud opportunities are big. Toss in big growth potential for privileged access management and endpoint detection and response, and the upside for investors is clearly there.

The Stifel analysts have numerous stock rated Buy, but here we focused on those the analysts feel have some of the biggest upside potential.

Barracuda Networks

This company recently reported very solid earnings. Barracuda Networks Inc. (NASDAQ: CUDA) designs and delivers security and data protection solutions. The company offers cloud-enabled solutions that enable customers address security threats, improve network performance and protect and store their data.

Last year Barracuda launched its new Vulnerability Remediation Service, expanding its award-winning Barracuda Web Application Firewall product line further simplifying the way web application security is deployed and managed. The Vulnerability Remediation Service automates security policy enforcement, making application security easy for DevOps teams by reducing costs and complexities traditionally associated with auditing code or patching software.

The Stifel price target for the stock is $32, and the Wall Street consensus target is $29.29. The stock closed Monday at $22.29 a share.

CyberArk Software

This company had a red-hot initial public offering (IPO) in 2014 and the share price is down almost 15% in the past month but has rallied back smartly off the lows. CyberArk Software Ltd. (NASDAQ: CYBR) claims it is the only security company focused on eliminating the most advanced cyber threats — those that use insider privileges to attack the heart of the enterprise. The company proactively secures against cyber threats before attacks can escalate and do irreparable damage. It is estimated that at least 35% of the Fortune 100 and 17 of the world’s top 20 banks use the software to protect high value information assets, infrastructure and applications.

CyberArk is a pioneer of a new layer of IT security solutions that protect organizations from cyberattackers that have evaded the network perimeter. CyberArk’s solutions secure organization’s critical assets dubbed privileged accounts, which are the keys to databases, industrial control systems, servers and applications, all of which house sensitive data. CyberArk’s software is focused on protecting these accounts, which are highly targeted in cyberattacks to disrupt networks and/or steal sensitive info.

Stifel has a $62 price objective for the stock, while the consensus target price is $58.45. The shares closed trading on Monday at $48.97.

Palo Alto Networks

This company was a momentum trader’s dream before crashing back to earth. Palo Alto Networks Inc. (NASDAQ: PANW) is helping to lead a new era in cybersecurity by protecting thousands of enterprise, government and service provider networks from cyber threats, and it boasts a staggering year-over-year billing growth. Unlike fragmented legacy products, its security platform safely enables business operations and delivers protection based on what matters most in today’s dynamic computing environments: applications, users and content.

Palo Alto Networks security platform has new features that were introduced to help security professionals overcome the distractions and time spent on problems caused by the overwhelming volume of alerts and manual processes associated with operating many discrete security products, and, instead, expand breach prevention capabilities and boost operational efficiency.

The $180 Stifel price target is compares with a consensus price objective of $149.37. The shares closed most recently at $134.14 apiece.

SecureWorks

This smaller cap company had a 2016 IPO and could potentially explode for investors this year. SecureWorks Corp. (NASDAQ: SCWX) is a security services carve-out of Dell, and it offers its global customers security services, outsourcing and consulting. The company is a leader in the $8.7 billion managed security services market, and it also addresses the broader IT security outsourcing and consulting markets.

The company combines its proprietary software platform, the Counter Threat Platform, with its internal security experts to remotely monitor and manage customer-owned security appliances.

SecureWorks reported first-quarter fiscal 2018 revenue that was ahead of some estimates, and its forward guidance was in line with expectations. With spending expected to remain elevated throughout the rest of 2017, the break even on EBITDA may have been pushed out a little farther.

The Stifel price objective is $15. The posted consensus price target $12.15, and the shares closed on Monday at $9.46.

Varonis Systems

This is another company that, while not a pure-play security stock, is a big potential winner in the overall sector. Varonis Systems Inc. (NASDAQ: VRNS) is a leading provider of software solutions that protect data from insider threats and cyberattacks.

Through an innovative software platform, Varonis allows organizations to analyze, secure, manage and migrate their volumes of unstructured data. Varonis specializes in file and email systems that store valuable spreadsheets, word processing documents, presentations, audio and video files, emails and text. This rapidly growing data often contains an enterprise’s financial information, product plans, strategic initiatives, intellectual property and confidential employee, customer or patient records.

IT and business personnel deploy Varonis software for a variety of use cases, including data security, governance and compliance, user behavior analytics, archiving, search, and file synchronization and sharing.

Stifel has set its price target at $37. The consensus target is $39, and the shares closed Monday at $36.20.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

While the whirlwind around the top stocks in the sector has really slowed from the 2013 to 2015 pace, the need is increasing every year sequentially. These top stocks offer investors solid ways to play the sector in a multitude of areas.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.