3 Cybersecurity Stocks that could Crush Palo Alto and CrowdStrike in 2024

Cybersecurity stocks have been under pressure lately, as the market has been hit by rising interest rates, inflation fears, and profit-taking. Some of the leading names in the industry, such as Palo Alto Networks (PANW) and CrowdStrike (CRWD), have seen their share prices drop by more than 20% from their recent highs.

However, this could be a great opportunity for savvy investors to scoop up some high-quality cybersecurity stocks at bargain prices. The demand for cybersecurity solutions is not going away anytime soon, as the world becomes more digital and connected, and as cyber threats become more frequent and sophisticated. In fact, the global cybersecurity market is expected to grow at a compound annual growth rate (CAGR) of 9.4% from 2023 to 2028, reaching $298.5 billion by 2028.

Many investors are looking at Palo Alto and CrowdStrike as the top picks in the cybersecurity space, and for good reasons. Palo Alto is the largest independent cybersecurity company by revenue, and it offers a comprehensive and integrated platform that covers network, cloud, endpoint, and threat intelligence solutions. CrowdStrike is the leader in cloud-native endpoint security, and it boasts a large and loyal customer base, a strong competitive moat, and a robust growth outlook.

However, Palo Alto and CrowdStrike are not the only cybersecurity stocks worth considering. There are some overlooked and undervalued players in the industry that have much better fundamentals and more potential growth than these two giants.

Before we dive into 3 stocks we believe may outperform this year, do consider taking a look at subscribing to our sponsor today ~ a FREE newsletter that give market timing and price projections!

In this blog, we will reveal the 3 cybersecurity stocks that could crush Palo Alto and CrowdStrike in 2024. These stocks are:

1. Zscaler (ZS): A cloud computing and internet security software provider that has been growing rapidly and gaining market share from legacy vendors.

2. Okta (OKTA): A cloud-based identity and access management company that helps organizations secure their users, devices, and data across various applications and environments.

3. SentinelOne (S): A recent IPO and CrowdStrike competitor that offers a next-generation platform that uses artificial intelligence and machine learning to prevent, detect, and respond to cyberattacks.

Let's take a closer look at each of these stocks and see why they could outperform Palo Alto and CrowdStrike in the coming year.

Zscaler: The Cloud Security Leader

Zscaler (ZS) is a cloud computing and internet security software provider that has been growing rapidly and gaining market share from legacy vendors. The company's flagship product, Zscaler Internet Access (ZIA), is a cloud-based platform that provides secure and fast access to the internet and cloud applications for users, regardless of their location or device. The company also offers Zscaler Private Access (ZPA), a cloud-based platform that provides secure and seamless access to private applications hosted in data centers or public clouds, without the need for VPNs or network perimeters.

Zscaler's solutions are based on its Zero Trust Network Access (ZTNA) architecture, which assumes that no user, device, or network is trustworthy, and verifies every request and transaction before granting access. This approach enhances security, performance, and user experience, as it eliminates the need for traditional security appliances, such as firewalls, proxies, and gateways, which create bottlenecks and vulnerabilities.

Zscaler has been benefiting from the accelerated digital transformation and cloud migration trends, as well as the increased demand for remote work and learning solutions, amid the COVID-19 pandemic. The company has seen strong growth in its revenue, customer base, and retention rate, as more organizations adopt its cloud-native and scalable solutions.

In fiscal 2023, which ended on July 31, 2023, Zscaler reported revenue of $1.1 billion, up 55% year over year. The company's revenue growth was driven by a 57% increase in subscription revenue, which accounted for 96% of the total revenue. The company's revenue retention rate, which measures the annualized revenue generated from existing customers, was 125%, indicating high customer satisfaction and loyalty.

Zscaler serves more than 5,000 customers, including over 450 of the Forbes Global 2000 companies, across various industries, such as healthcare, financial services, manufacturing, and technology. Some of its notable customers include Siemens, GE, VMware, Humana, and the U.S. Department of Defense. The company has a large and untapped market opportunity, as it estimates its total addressable market to be $72 billion, based on the number of internet-connected users and devices in the world.

Zscaler faces competition from other cloud security providers, such as Cloudflare, Netskope, and McAfee, as well as from legacy vendors, such as Cisco, Symantec, and Check Point. However, we believe Zscaler has a competitive edge over its rivals, based on the following factors:

- First-mover and market leader: Zscaler was the first company to offer a cloud-based security platform that replaces traditional security appliances, and it has established itself as the market leader in the ZTNA segment, with a 60% market share, according to Gartner. The company has a strong brand recognition and reputation in the industry, as well as a loyal and satisfied customer base.

- Superior technology and innovation: Zscaler has a proprietary and patented technology platform, which consists of over 150 data centers around the world, that provides high-performance, low-latency, and secure access to the internet and cloud applications. The company also leverages artificial intelligence and machine learning to enhance its products and services, and to provide proactive and automated threat prevention and response capabilities. The company invests heavily in research and development, spending 19% of its revenue on R&D in fiscal 2023, and has a strong patent portfolio, with over 300 patents issued or pending.

- Scalable and profitable business model: Zscaler has a scalable and profitable business model, which benefits from high recurring revenue, low customer acquisition costs, and high operating leverage. The company's subscription-based revenue model provides predictable and stable cash flows, as well as high gross margins, which were 81% in fiscal 2023. The company's customer acquisition costs are low, as it relies on word-of-mouth, referrals, and partnerships, rather than on expensive sales and marketing campaigns. The company's operating leverage is high, as it does not incur significant capital expenditures or maintenance costs, unlike its hardware-based competitors. The company's operating margin improved from -6% in fiscal 2022 to 7% in fiscal 2023, and the company expects to achieve a long-term operating margin of 20% to 25%.

These factors, combined, make Zscaler a compelling cybersecurity stock to buy, as it has a strong growth outlook, a large market opportunity, and a competitive moat. We believe Zscaler could outperform Palo Alto and CrowdStrike in 2024, as it continues to gain market share and expand its product portfolio and customer base.

Okta: The Identity and Access Management Leader

Okta (OKTA) is a cloud-based identity and access management company that helps organizations secure their users, devices, and data across various applications and environments. The company's core product, Okta Identity Cloud, is a platform that provides a range of solutions, such as:

- Single sign-on (SSO): A solution that enables users to access multiple applications with one username and password, without compromising security or convenience

- Adaptive multi-factor authentication (MFA): A solution that adds an extra layer of security to user authentication, by requiring users to provide additional factors, such as a code, a fingerprint, or a face scan, depending on the context and risk level of the request

- Universal directory: A solution that centralizes and manages user identities and attributes across different sources, such as Active Directory, LDAP, HR systems, and social networks

- Lifecycle management: A solution that automates the provisioning and deprovisioning of user accounts and access rights, based on predefined rules and policies

- API access management: A solution that secures and manages access to APIs, by applying granular and dynamic policies and controls

- Advanced server access: A solution that provides secure and seamless access to cloud and on-premise servers, by using identity as the new perimeter

- Okta integration network: A network of over 7,000 pre-built integrations with various cloud and on-premise applications, such as Office 365, Salesforce, Zoom, and Slack

Okta's solutions are based on its Zero Trust Security framework, which assumes that no user, device, or network is trustworthy, and verifies every request and transaction before granting access. This approach enhances security, efficiency, and user experience, as it eliminates the need for passwords, VPNs, and network perimeters.

Okta has been benefiting from the accelerated digital transformation and cloud adoption trends, as well as the increased demand for remote work and learning solutions, amid the COVID-19 pandemic. The company has seen strong growth in its revenue, customer base, and retention rate, as more organizations adopt its cloud-native and scalable solutions.

In fiscal 2023, which ended on January 31, 2023, Okta reported revenue of $1.2 billion, up 40% year over year. The company's revenue growth was driven by a 42% increase in subscription revenue, which accounted for 95% of the total revenue. The company's revenue retention rate, which measures the annualized revenue generated from existing customers, was 121%, indicating high customer satisfaction and loyalty.

Okta serves more than 10,000 customers, including over 1,600 of the Forbes Global 2000 companies, across various industries, such as healthcare, financial services, education, and technology. Some of its notable customers include FedEx, JetBlue, Adobe, T-Mobile, and the U.S. Department of Justice. The company has a large and untapped market opportunity, as it estimates its total addressable market to be $80 billion, based on the number of employees and customers that need identity and access management solutions.

Okta faces competition from other identity and access management providers, such as Microsoft, Ping Identity, and Auth0, as well as from legacy vendors, such as IBM, Oracle, and CA Technologies. However, we believe Okta has a competitive edge over its rivals, based on the following factors:

- Independent and neutral platform: Okta is the only major identity and access management provider that is independent and neutral, meaning that it does not compete with its customers or partners in other domains, such as cloud computing, productivity software, or social media. This gives Okta a strategic advantage, as it can offer unbiased and best-in-class solutions that integrate with any application or environment, without any conflicts of interest or vendor lock-in.

- Superior technology and innovation: Okta has a proprietary and patented technology platform, which is built on a modern and flexible architecture, that provides high-performance, reliability, and security for its solutions. The company also leverages artificial intelligence and machine learning to enhance its products and services, and to provide adaptive and personalized authentication and access experiences. The company invests heavily in research and development, spending 29% of its revenue on R&D in fiscal 2023, and has a strong patent portfolio, with over 300 patents issued or pending.

- Scalable and profitable business model: Okta has a scalable and profitable business model, which benefits from high recurring revenue, low customer acquisition costs, and high operating leverage. The company's subscription-based revenue model provides predictable and stable cash flows, as well as high gross margins, which were 78% in fiscal 2023. The company's customer acquisition costs are low, as it relies on word-of-mouth, referrals, and partnerships, rather than on expensive sales and marketing campaigns. The company's operating leverage is high, as it does not incur significant capital expenditures or maintenance costs, unlike its hardware-based competitors. The company's operating margin improved from -16% in fiscal 2022 to -11% in fiscal 2023, and the company expects to achieve a long-term operating margin of 15% to 20%.

These factors, combined, make Okta a compelling cybersecurity stock to buy, as it has a strong growth outlook, a large market opportunity, and a competitive moat. We believe Okta could outperform Palo Alto and CrowdStrike in 2024, as it continues to gain market share and expand its product portfolio and customer base.

SentinelOne: The Next-Generation Endpoint Security Leader

SentinelOne (S) is a recent IPO and CrowdStrike competitor that offers a next-generation platform that uses artificial intelligence and machine learning to prevent, detect, and respond to cyberattacks. The company's core product, SentinelOne Singularity, is a platform that provides a range of solutions, such as:

- Endpoint protection: A solution that protects endpoints, such as laptops, desktops, servers, and IoT devices, from malware, ransomware, and other threats, by using behavioral analysis, static analysis, and cloud intelligence

- Endpoint detection and response: A solution that detects and responds to advanced and unknown threats, by using automated investigation, remediation, and threat hunting capabilities

- ActiveEDR: A solution that provides real-time visibility and insight into endpoint activity and behavior, by using data streaming, contextual analysis, and storylines

- Ranger: A solution that extends endpoint security to the network, by using IoT discovery, device control, and network segmentation capabilities

- Singularity XDR: A solution that integrates endpoint, cloud, and network security, by using data correlation, automation, and orchestration capabilities

SentinelOne's solutions are based on its Singularity Core, which is a patented and proprietary technology that uses artificial intelligence and machine learning to analyze massive amounts of data from endpoints, cloud, and network sources, and to provide autonomous and adaptive security actions.

SentinelOne has been benefiting from the growing demand for endpoint security solutions, as endpoints are the most vulnerable and targeted entry points for cyberattacks. The company has seen strong growth in its revenue, customer base, and retention rate, as more organizations adopt its cloud-native and scalable solutions.

In fiscal 2023, which ended on January 31, 2023, SentinelOne reported revenue of $400 million, up 108% year over year. The company's revenue growth was driven by a 113% increase in subscription revenue, which accounted for 97% of the total revenue. The company's revenue retention rate, which measures the annualized revenue generated from existing customers, was 124%, indicating high customer satisfaction and loyalty.

SentinelOne serves more than 4,700 customers, including over 500 of the Forbes Global 2000 companies, across various industries, such as healthcare, financial services, education, and technology. Some of its notable customers include JetBlue, McKesson, Aston Martin, and the U.S. Air Force. The company has a large and untapped market opportunity, as it estimates its total addressable market to be $40 billion, based on the number of endpoints that need security solutions.

SentinelOne faces competition from other endpoint security providers, such as CrowdStrike, McAfee, and Microsoft, as well as from legacy vendors, such as Symantec, Kaspersky, and Trend Micro. However, we believe SentinelOne has a competitive edge over its rivals, based on the following factors:

- Disruptive and differentiated platform: SentinelOne is the only endpoint security provider that offers a fully autonomous and AI-powered platform that can prevent, detect, and respond to cyberattacks, without relying on human intervention, signatures, or cloud connectivity. The company's platform is also the only one that can protect endpoints across all major operating systems, such as Windows, Mac, Linux, Android, and iOS. The company's platform is also the only one that can extend endpoint security to the network and the cloud, by using its Ranger and Singularity XDR solutions. The company's platform is also the only one that can provide real-time visibility and insight into endpoint activity and behavior, by using its ActiveEDR and Storyline solutions. The company's platform is also the only one that can provide a single agent, single console, and single codebase for all its solutions, which simplifies deployment, management, and integration.

- Superior technology and innovation: SentinelOne has a proprietary and patented technology platform, which uses artificial intelligence and machine learning to analyze massive amounts of data from endpoints, cloud, and network sources, and to provide autonomous and adaptive security actions. The company also leverages behavioral analysis, static analysis, and cloud intelligence to enhance its products and services, and to provide proactive and automated threat prevention and response capabilities. The company invests heavily in research and development, spending 36% of its revenue on R&D in fiscal 2023, and has a strong patent portfolio, with over 200 patents issued or pending.

- Scalable and profitable business model: SentinelOne has a scalable and profitable business model, which benefits from high recurring revenue, low customer acquisition costs, and high operating leverage. The company's subscription-based revenue model provides predictable and stable cash flows, as well as high gross margins, which were 75% in fiscal 2023. The company's customer acquisition costs are low, as it relies on word-of-mouth, referrals, and partnerships, rather than on expensive sales and marketing campaigns. The company's operating leverage is high, as it does not incur significant capital expenditures or maintenance costs, unlike its hardware-based competitors. The company's operating margin improved from -95% in fiscal 2022 to -47% in fiscal 2023, and the company expects to achieve a long-term operating margin of 20% to 25%.

These factors, combined, make SentinelOne a compelling cybersecurity stock to buy, as it has a strong growth outlook, a large market opportunity, and a competitive moat. We believe SentinelOne could outperform Palo Alto and CrowdStrike in 2024, as it continues to gain market share and expand its product portfolio and customer base.

Conclusion and Recommendation

Cybersecurity is one of the most important and fastest-growing sectors in the technology industry, as the world becomes more digital and connected, and as cyber threats become more frequent and sophisticated. The global cybersecurity market is expected to grow at a compound annual growth rate (CAGR) of 10.9% from 2020 to 2027, reaching $372.6 billion by 2027, according to Grand View Research.

Many investors are looking at Palo Alto Networks (PANW) and CrowdStrike (CRWD) as the top picks in the cybersecurity space, and for good reasons. Palo Alto is the largest independent cybersecurity company by revenue, and it offers a comprehensive and integrated platform that covers network, cloud, endpoint, and threat intelligence solutions. CrowdStrike is the leader in cloud-native endpoint security, and it boasts a large and loyal customer base, a strong competitive moat, and a robust growth outlook.

However, Palo Alto and CrowdStrike are not the only cybersecurity stocks worth considering. There are some overlooked and undervalued players in the industry that have much better fundamentals and more potential growth than these two giants. In this blog, we have revealed the 3 cybersecurity stocks that could crush Palo Alto and CrowdStrike in 2024. These stocks are:

- Zscaler (ZS): A cloud computing and internet security software provider that has been growing rapidly and gaining market share from legacy vendors. Zscaler is the market leader in the Zero Trust Network Access (ZTNA) segment, with a 60% market share, according to Gartner. Zscaler has a strong growth outlook, a large market opportunity, and a competitive moat, based on its first-mover and market leader status, its superior technology and innovation, and its scalable and profitable business model.

- Okta (OKTA): A cloud-based identity and access management company that helps organizations secure their users, devices, and data across various applications and environments. Okta is the only major identity and access management provider that is independent and neutral, meaning that it does not compete with its customers or partners in other domains. Okta has a strong growth outlook, a large market opportunity, and a competitive moat, based on its independent and neutral platform, its superior technology and innovation, and its scalable and profitable business model.

- SentinelOne (S): A recent IPO and CrowdStrike competitor that offers a next-generation platform that uses artificial intelligence and machine learning to prevent, detect, and respond to cyberattacks. SentinelOne is the only endpoint security provider that offers a fully autonomous and AI-powered platform that can prevent, detect, and respond to cyberattacks, without relying on human intervention, signatures, or cloud connectivity. SentinelOne has a strong growth outlook, a large market opportunity, and a competitive moat, based on its disruptive and differentiated platform, its superior technology and innovation, and its scalable and profitable business model.

We believe these 3 cybersecurity stocks could outperform Palo Alto and CrowdStrike in 2024, as they continue to gain market share and expand their product portfolio and customer base. We recommend investors to buy these stocks and hold them for the long term, as they have the potential to generate significant returns and value for shareholders.

We hope you enjoyed this blog and found it informative and useful. If you did, please share it with your friends and colleagues, and subscribe to our newsletter for more insights and tips on cybersecurity investing. Thank you for reading. 😊

Together, Next Level

Sean