The Perfect Stock to Profit From Growing Cybercrime | Editor’s Note: On Monday, February 19, the stock market will be closed for the Presidents Day holiday. The InvestorPlace offices and customer service department will also be closed on Monday. I hope you enjoy the long weekend! | | | Dear Reader, When was the last time you updated your password?
If you have an account with LinkedIn, X (formerly Twitter), Venmo, Canva, Apollo Global Management, Inc. (APO) or Adobe Inc. (ADBE), then you might want to consider changing it now.
In late January, cybersecurity researcher Bob Dyachenko and the Cybernews team reported that a whopping 26 billion records were leaked. It covered 3,800 folders, each tied to a separate data breach. As you can see in the chart below, 20 companies had more than 100 million records leaked. Tencent (TCEHY) takes the cake, with 1.5 billion records leaked.  They call it: The “Mother of all Breaches.”
The unfortunate reality is that because we rely so heavily on the internet, we are increasingly vulnerable to cyberattacks. In fact, more than 2,200 cyberattacks occur each day, which equates to about one attack every 39 seconds, according to Security Magazine.
So, it’s no surprise that cybercrime is an expensive business. In 2018, it cost $1.5 trillion for businesses to protect themselves against attacks. By next year, that number is expected to hit a stunning $10.5 trillion, according to Cybersecurity Ventures.
With cybercrime and the costs to combat it on the rise, so, too, have cybersecurity stocks. The ETFMG Prime Cyber Security ETF (HACK), which tracks 59 cybersecurity stocks, is up about 36.8% over the past year. That’s more than the S&P 500’s 21.1% gain and the Dow’s 13.3% advance during that time.
Personally, I am not a big fan of ETFs and would not recommend a cybersecurity ETF (or any other kind, for that matter), but I am bullish on cybersecurity stocks. So, in today’s Market 360, we’ll take a closer look at a lesser-known cybersecurity company that has utilized artificial intelligence and machine learning for years in its leading platform to provide security and identity protection. I’ll share if it’s a good buy right now, and then I’ll explain what you need to remain laser-focused on in the current market environment.
Let’s jump right in. Using AI to Prevent Cyberattacks The company I want to introduce you to today is CyberArk Software Ltd. (CYBR). It is primarily a cybersecurity company, leading the charge to protect businesses against cyberattacks. The company provides privileged access security, which protects a business’s assets, data and infrastructure. Simply put, it offers a complete security solution that allows CyberArk Software’s customers to prevent cyberattacks, not just react to them.
With the growth in artificial intelligence over the past few years – and anticipated expansion for the foreseeable future – CyberArk Software recently revealed in a report that 93% of security professionals anticipate AI-enabled attacks will impact organizations this year. AI-powered malware is the biggest concern.
In response to these concerns, CyberArk Software launched the Artificial Intelligence Center of Excellence in the fall of 2023. The center partners with CyberArk Labs to research the impact of generative AI attacks and to develop AI-powered defenses to counteract them.
With cybersecurity front and center for businesses and organizations around the world, it’s not too surprising that CyberArk Software’s solutions are in top demand.
CyberArk Software has more than 8,000 customers in 110 countries. These customers include more than 55% of the Fortune 500, as well as more than 35% of the Global 2000.
So, CyberArk Software’s business is booming, which is why it’s no surprise the company exceeded expectations for its fourth quarter and fiscal year 2023.
On Thursday, February 8, CyberArk Software announced that total fourth-quarter revenue increased 32% year-over-year to $223.1 million, with subscription revenue accounting for $150.3 million. Analysts only expected total revenue of $209.68 million.
Fourth-quarter earnings surged 406.3% year-over-year to $0.81 per share, compared to $0.16 per share in the same quarter a year ago. Analysts expected earnings of $0.47 per share, so CyberArk Software crushed estimates by 72.3%.
Management noted that the fourth quarter wrapped up what was a “momentous year” for the company. Record demand for its solutions drove total revenue 27% higher to $751.9 million in 2023. Full-year earnings also soared to $1.12 per share, up from a $0.44 per share loss in 2022. These results also beat estimates for full-year revenue of $738.44 million and earnings of $0.78 per share.
Looking ahead, CyberArk Software expects first-quarter revenue between $209.0 million and $215.0 million and earnings per share between $0.21 and $0.31. That compares to analysts’ current projections for first-quarter revenue of $206.77 million and earnings of $0.24 per share.
For fiscal year 2024, the company anticipates revenue between $920.0 million and $930.0 million and earnings per share between $1.63 and $1.81. Analysts currently expect full-year revenue of $915.82 million and earnings of $1.72 per share. To Buy or Not to Buy… CYBR surged more than 7% to a new record closing high of $281.31 on February 8 following the stunning results and strong forward-looking guidance. And then it hit a new record intraday high of $283 on Monday, February 12.
Since touching $283 on Monday, the stock has given up some of its post-earnings gains, sliding down about 8% to trade around $263.
So, should the stock be avoided, or is this an opportunity to buy the dip?
Well, according to my Portfolio Grader, CyberArk Software is still a strong buy.  As you can see, the stock earns an A-rating for its Quantitative Grade and a B-rating for its Fundamental Grade and an A-rating for its Total Grade. This is a stock with superior fundamentals that is also backed by persistent buying pressure, i.e., money is flowing into the stock. This is also why I recommended CyberArk Software to my Accelerated Profits subscribers on January 16, 2024. The stock had just been upgraded to an A-rating, and given its spectacular third-quarter earnings –earnings surged to $0.42 per share (an 82.6% earnings surprise), compared to a loss of $0.06 per share in the third quarter of 2022 – I knew it was time to pull the trigger. And even with the stock’s pullback this week, we’re still up about 16%.
Now, CyberArk Software isn’t just a great cybersecurity stock. It’s also a great example of a fundamentally superior stock … and what happens when earnings work: It posted strong earnings, revenue and guidance, and its stock popped. In other words, it was rewarded by Wall Street.
The reality is that investors remain fundamentally focused, which is great news for my fundamentally superior stocks in Accelerated Profits – and not just those in the cybersecurity industry.
For example, just this morning, Targa Resources Corp. (TRGP), which is primarily an oil and natural gas infrastructure company, rallied more than 4% to a new 52-week high following its stunning results. It achieved record operational and financial results in fiscal year 2023 and provided a strong outlook for fiscal year 2024. It’s All About Earnings The bottom line: It’s all about earnings, folks.
It’s why I am laser-focused on earnings and why my Accelerated Profits Buy List is chock-full of high-quality stocks. My Accelerated Profits stocks have superior forecasted sales (36.7%) and earnings growth (209.9%), as well as a strong earnings surprise history (39.2%).
Since my Accelerated Profits stocks have much stronger average sales and earnings growth than the overall market – the S&P 500 has forecasted 3.9% sales and 2.9% earnings growth, as well as an average 3.8% earnings surprise – I expect my Accelerated Profits stocks to continue to emerge as the market leaders!
This includes my newest recommendation… This company is expected to post 23.1% year-over-year earnings growth and 12.5% year-over-year revenue growth. The analyst has increased earnings estimates in the past month, so a fourth-straight quarterly earnings surprise is likely.
This company is scheduled to release its quarterly report next Tuesday, February 20. If it tops analysts’ expectations, it could easily follow in the steps of CyberArk Software or Targa Resources and rally.
For full details on how to access my latest recommendation – as well as all you need to know about Accelerated Profits – click here.
(Already an Accelerated Profits member? Click here to log in to the members-only website now.) Sincerely, |
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