Three Cybersecurity Shares Worthy of Long-Term Investment over the Next Ten Years
Three Cybersecurity Shares Worthy of Long-Term Investment over the Next Ten Years
expectations are sky-high for the cloud and AI sectors, with investors anticipating radical shifts in the tech landscape and substantial returns. However, these sectors' success hinges heavily on robust cybersecurity. Investors have taken notice of this necessity, causing many leading stocks in the industry to trade at premium prices.
Despite these premiums, they're not so high that investors can't afford to purchase shares now and potentially earn substantial profits over the next decade. Particularly, I'd recommend considering these cybersecurity stocks.
CrowdStrike
Some investors might raise an eyebrow at CrowdStrike (CRWD 0.69%). An update to its security software for Windows operating system machines led to a global IT outage, causing the stock's value to plummet. Despite this mishap, its price-to-sales (P/S) ratio rebounded to 24, indicating how costly this stock has become.
CrowdStrike swiftly took responsibility for the issue and provided a swift fix. It seems that the company's transparency and swift response have helped maintain the trust of clients, as there have been no significant exodus from its platform.
While CrowdStrike is most recognized for its endpoint security offerings, its Falcon platform provides a variety of security products. Consequently, the average customer subscribes to seven of its modules. Moreover, several companies prefer to simplify their tech collaborations by having a single company manage all their cybersecurity needs. CrowdStrike's trend of simplification appears to be favoring its growth.
The IT outage took place in July, at the end of the company's fiscal 2025 second quarter. As a result, it didn't significantly impact the $964 million in revenue it raked in for that quarter (which ended on July 31). The top line increased by 32% year over year. Additionally, slower expense growth permitted it to book $47 million in net income for fiscal Q2, surpassing its $8.5 million profit in the previous quarter.
Investors will receive more insights into How the outage is impacting CrowdStrike's financial performance when it releases its fiscal Q3 numbers on Nov. 26. However, it seems that investors have largely moved on, suggesting they believe the issue will not hamper CrowdStrike's long-term growth trajectory.
SentinelOne
Just like CrowdStrike, SentinelOne (S -0.46%) focuses on endpoint security. However, it distinguishes itself by employing an AI-first approach and monitoring behavior to identify threats. This could give it a competitive edge.
Furthermore, its platform is adaptable across multiple third-party products and services, making it easy to incorporate into customers' networks. SentinelOne's software has grown in popularity, with revenue rising 33% year over year to $199 million during its fiscal 2025 second quarter (which ended on July 31). While it has yet to turn a profit, it has managed to keep costs under control, resulting in an operating loss of $69 million, compared to $90 million in the previous year.
Although the stock has struggled this year, its P/S ratio of 11 might entice investors looking for fewer expensive options in the cybersecurity arena, potentially putting SentinelOne stock on the path to substantial growth.
Zscaler
Zscaler (ZS -3.79%) is another security company well-positioned to capitalize on organizations' increasing demand for cybersecurity. Offering a plethora of security products like its competitors, Zscaler distinguishes itself with its focus on zero-trust security.
A zero-trust system assumes that any user trying to access a network is an attacker. Therefore, every user must validate their credentials through criteria such as specific gadgets or locations. A user's role within the organization typically determines their level of network access, limiting the potential damage an attacker can cause with a single breached credential.
In the fourth quarter of its fiscal 2024, which ended on July 31, Zscaler boosted its revenue by 30% to $593 million. Its revenue growth slightly outpaced its expense growth, enabling it to decrease its net loss to $15 million from $31 million in the prior year.
As with its peers, Zscaler's growth rate from previous years deterred investors, causing them to lose interest in Zscaler stock. However, the cybersecurity industry is projected to continue expanding, so even if growth rates slow down, Zscaler should still benefit from substantial revenue increases for years to come. Given its projected growth, its 14 P/S ratio likely won't deter investors from Zscaler stock.
Despite the premium prices of leading cybersecurity stocks, investors still see potential for substantial returns. Specifically, CrowdStrike's price-to-sales ratio, despite its previous mishap, indicates its high value in the market.
Investors seeking cybersecurity solutions at more affordable prices might consider SentinelOne's stock, which has a lower P/S ratio compared to other industry leaders, despite its focus on AI-first endpoint security and rapid revenue growth.