Apps & Software

Goldman Sachs Sees Cybersecurity Demand Exploding: 5 Red-Hot Stocks to Buy Now

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Technology has been a big winner in 2021, and the same is expected for 2022 and beyond, as many of the top software stocks already have had an outstanding year. It continues to be critical for companies and governments to protect data and to keep malicious hackers and malware from invading information technology systems, infrastructure and critical sensitive data.
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In a new research report, Goldman Sachs remains very positive on the top cybersecurity and analytics stocks, and with good reason. The rate of serious security problems has increased, and top management will not remain long at major U.S. companies if the ultimate effort for security and safety is not undertaken. Goldman Sachs noted this when discussing demand for the rest of the year and beyond:

As companies reported results for the second calendar quarter, we saw evidence that digital transformation, expansion of attack surfaces, an elevated threat environment, and widely publicized security incidents continue to drive accelerated demand for Next Generation security. However, we also saw confirmation that we are in the middle of one of the most substantial firewall-related spending cycles we’ve seen in years. Demand during the first quarter of this year was stronger than seasonally expected as the majority of vendors within our coverage group beat expectations. We saw demand continue to accelerate in the second quarter, and those vendors better positioned to benefit from these secular drives saw year-over-year growth accelerate with share gains supported by better cross-sell, up-sell, and new business.


The analysts say now is the time to own security software stocks, and these five are outstanding ideas for aggressive growth investors looking to add this hot technology silo. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

AvePoint

This very off-the-radar company could be a big winner. AvePoint Inc. (NASDAQ: AVPT) provides Microsoft 365 data management solutions worldwide. It offers a suite of software as a service solutions to migrate, manage and protect data. The company provides cloud solutions for Office 365, Salesforce and Dynamics 365, as well as hybrid/on-premises products. It also offers advisory and implementation, maintenance and support, Microsoft Teams surge and advisory, migration as a service and quick-start services.

Earlier this year, the company announced the completion of its previously announced business combination with Apex Technology Acquisition, a publicly traded special purpose acquisition company (SPAC).

Goldman Sachs is very positive and said this when it started coverage on the stock this summer:

We initiate coverage of AvePoint with a Buy rating. The company delivered total revenue of $151.5 million last year and accelerated annual recurring revenue growth to 33.2% year-over-year this past quarter. The stock has remained relatively undiscovered due to its recent emergence as a public company via SPAC transaction in our view. We believe the pace of digital transformation, accelerated by COVID-19, coupled with growing Office 365 adoption will continue to serve as secular tailwinds for AvePoint.

Goldman Sachs has a $17 price target on AvePoint stock. The consensus target is lower at $15.38, and the shares closed on Monday at $9.83.


Palo Alto Networks

This continues to be one of the most dominant players in the industry. Palo Alto Networks Inc. (NASDAQ: PANW) provides cybersecurity platform solutions worldwide. The company provides firewall appliances and software; Panorama, a security management solution for the control of appliances and software deployed on an end-customer’s network as a virtual or a physical appliance; and virtual system upgrades, which are available as extensions to the virtual system capacity that ships with physical appliances.
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Palo Alto Networks also offers subscription services covering the areas of threat prevention, uniform resource locator filtering, malware and persistent threat, laptop and mobile device protection and firewall, as well as cyberattacks, threat intelligence and data loss prevention. In addition, the company provides professional services, including architecture design and planning, configuration and firewall migration, as well as online and in-classroom education training services and support services.

The company sells its products and services through its channel partners, as well as directly to medium to large enterprises, service provider, and government entities operating in various industries, including education, energy, financial services, government entities, health care, internet and media, manufacturing, public sector and telecommunications.

The Goldman Sachs price target is $535, and the consensus target for Palo Alto Networks is $479.51. The shares closed at $476.12 on Monday.

Ping Identity

This company is at the forefront of cybersecurity and the stock has awesome growth potential. Ping Identity Holding Corp. (NYSE: PING) is a leader in identity access and management. Its products safeguard enterprise applications and data by providing controls around user authentication, access and more.

Ping’s single-sign-on technology helps streamline user workflow by providing a single password for multiple applications to reduce log-ins. Additional product features include consumer identity management, Internet of Things and application programming interface management. Ping differentiates with a history of complex deployments across hybrid networks.

Ping’s core solution is at the heart of one of the biggest trends in security software: the dissolving network perimeter and security based on identity rather than physical location inside a corporate network perimeter. While demographic tailwinds were already favorable as the incremental workforce prefers work-from-anywhere (not inside the corporate perimeter) and on any device (not just corporate-issued PCs), this trend is expected to accelerate in a post-pandemic world as the remaining workforce is becoming conditioned to this.

The $32 Goldman Sachs price target compares to a $32.50 consensus target and the $25.26 closing share price for Ping Identity stock on Monday.

SentinelOne

This is perhaps a lesser-known stock in the industry, but it offers a very attractive entry point. SentinelOne Inc. (NYSE: S) operates as a cybersecurity provider in the United States. Its Singularity Platform delivers artificial intelligence-powered autonomous threat prevention, detection and response capabilities across an organization’s endpoints and cloud workloads, enabling seamless and automatic protection against a spectrum of cyber threats.
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The company recently reported its first earnings as a publicly traded stock, with revenue growth of 121%  above expectations and adjusted profit in line with views. Annual recurring revenue (ARR) increased 127%, including the acquisition of Scalyr, the company said. The number of customers with ARR over $100,000 grew 140% year over year.

Goldman Sachs has set an $82 price target. The consensus target is $76.46, and the last SentinelOne stock trade on Monday was reported at $61.00.

Tenable

This company went public in 2018 and may be the hidden gem in the Goldman Sachs universe. Tenable Holdings Inc. (NASDAQ: TENB) engages in the development of security software solutions. It offers Cyber Exposure, which is a discipline for managing and measuring cybersecurity risk in the digital era. Its products include Tenable.io, Tenable.sc and Nessus Professional. The firm delivers solutions in the field of application security, cloud security, compliance, energy, finance, health care, and retail.

Over 27,000 organizations around the globe rely on Tenable to understand and reduce cyber risk. As the creator of Nessus, Tenable extended its expertise in vulnerabilities to deliver the world’s first platform to see and secure any digital asset on any computing platform. Tenable customers include more than half of the Fortune 500, more than 25% of the Global 2000 and large government agencies.

The Goldman Sachs price target on Tenable stock is $61. The $60.38 consensus target is slightly lower, and Monday’s closing trade was at $48.22 a share.


While the whirlwind around the top stocks in the industry has changed over the years as the pace of massive hacker attacks has grown, the need for corporate America and government is increasing every year. These top stocks offer investors solid ways to play the segment in a multitude of areas.

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