If there is any silo of software technology that will always be considered “must have” for corporate America and the government, it is cybersecurity software. With each passing year, the talents of the cyber thieves and hackers improve. The fortunate turn for the sector has been the shift to cloud-based protocols. In addition, the adoption of zero-trust architecture has been huge for the sector.
Zero-trust architecture is an alternative security model that addresses the fundamental flaw of traditional strategies that data only needs to be protected from outside of an organization. The zero-trust model views data security through a new lens, enabling parameters that dictate access and restrictions internally as well.
A new BofA Securities research report notes vendors are increasingly benefiting from the cloud, zero-trust and the seemingly new normal of telecommuting. They noted this in the firm’s recently released research primer on the sector.
We favor vendors that are positioned well to benefit from the forthcoming multi-year industry transitions, with growing adoption of Zero Trust architectures, Security-as-a-Service, Identity, Endpoint and Email security.
Four top companies are leaders in this brave new world of cybersecurity, and all are rated Buy at BofA Securities.
The cybersecurity giant’s stock was cut in half before rallying back. CrowdStrike Holdings Inc. (NASDAQ: CRWD) is a leader in the endpoint protection platform (EPP) market. EPP solutions help protect enterprises’ internet-connected devices from cyberattacks, and there is a market shift from signature-based on-premises solutions to cloud-based platforms that use machine learning.
CrowdStrike’s platform is one of the few 100% cloud-based architectures and is uniquely positioned to displace incumbents with its platform breadth, including advanced detection and remediation capabilities.
The analysts remain very positive and said this:
Our price objective is based on roughly 23x our calendar year 2021 estimated Enterprise value to sales metric. We choose EV/Sales as our target valuation metric due to CrowdStrike’s early growth stage and investment period creating outsized operating losses in the near term. The multiple is a premium versus SaaS-based software companies (10x) and versus SaaS/cyber security peers (15x). We believe a premium valuation is warranted due to CrowdStrike’s higher growth profile and potential to take meaningful share in new markets that would increase the total addressable market and potentially accelerate growth. The positives of CrowdStrike’s high growth and long-term opportunities are somewhat offset by lower margins.
BofA Securities has set a $100 price target on the shares, while the Wall Street consensus price target is $104.67. CrowdStrike stock closed Tuesday’s trading session at $101.04 a share.
This stock is still trading well below its 52-week high. CyberArk Software Ltd. (NASDAQ: CYBR) develops, markets and sells software-based security solutions and services for organizations to safeguard and monitor their privileged accounts.
The company’s solutions include Core Privileged Access Security for risk-based credential security and session management, with add-on options for least privilege server and domain controller protection, as well as secure remote vendor access to privileged access security; Application Access Manager for secrets management for application types and non-human identities; and Endpoint Privilege Manager for least privilege and credential theft protection for workstations.
CyberArk also provides its Sensitive Information Management solution, as well as software maintenance and support and professional services. The company offers its products to financial services, manufacturing, insurance, health care, energy, utilities, transportation, retail, technology and telecommunications industries and government agencies through direct sales force, as well as distributors, systems integrators, value-added resellers and managed security service providers.