The software industry had an incredible run during the long bull market, but some of the top players were hammered recently. As recently as last month, some top stocks in the cloud, software as a service and customer relationship management areas were absolutely torched. While they remain outstanding stocks to invest in, the rich valuations attached cannot survive forever, especially if the market takes a big dive. It may make sense to start looking for companies in the sector that are not so valuation rich.
Security software remains in demand, and with good reason. Even as technology has improved to keep away hackers and cybercriminals, the technology they use has improved as well. The constant battle to stay one step ahead persists.
Raymond James has renewed coverage on the top cybersecurity stocks, and favors three companies now, especially with third-quarter earnings reports on the way. The analysts noted this in the report:
We believe the Cybersecurity Software industry is in the midst of a “Golden Age” as the combination of durable growth drivers and low cost of capital have resulted in broad-based outperformance for equity holders, and we believe this trend should continue.
The three favorite companies all make sense for investors looking for technology ideas that may not be quite as crowded as the mega-cap momentum leaders.
This stock backed up nicely since the summer and offers a very attractive entry point. Fortinet Inc. (NASDAQ: FTNT) secures the largest enterprise, service provider and government organizations around the world. It empowers its customers with complete visibility and control across the expanding attack surface and the power to take on ever-increasing performance requirements today and into the future.
Fortinet’s Security Fabric platform can address the most critical security challenges and protect data across the entire digital infrastructure, whether in networked, application, multi-cloud or edge environments. Fortinet ranks number one in the most security appliances shipped worldwide, and more than 465,000 customers trust Fortinet to protect their businesses. Both a technology company and a learning organization, the Fortinet Network Security Expert Training Institute has one of the largest and broadest cybersecurity training programs in the industry.
The analysts said this:
We think penetration of compute-intensive functions like SD-WAN provides significant runway (currently 12% of billings), and the technology gap is significant, which should lead to sustained organic growth. Recent transactions in SD-WAN serve as a near-term catalyst given tech leader Silver Peak is in the process of being acquired by HP Enterprise.
The Raymond James Outperform rating on the shares comes with a $155 price objective. The Wall Street consensus target is $139.50, and Fortinet stock closed Monday at $119.09 a share.