3 Top Cybersecurity Stocks to Snag as Digital Threats Ramp Up

As enterprises and large organizations brace themselves for an increasing reliance on the Internet for daily operations, the digital arena is increasingly vulnerable to cyber risks. The relentless pursuit of hackers — both domestic and foreign — to exploit vulnerabilities has made cybersecurity a hot topic. Recent incidents, such as the data breaches involving American Water Works (AWK) and Comcast (CMCSA), have underscored the growing urgency for robust cybersecurity solutions.

With the evolution of artificial intelligence (AI) and sophisticated threats like deep fakes, we’re navigating through a new landscape of cyber risks. In response, the global cybersecurity market is on the brink of explosive growth. Various reports, including one that projects the cybersecurity market to swell to a staggering $562.72 billion by 2032 from $193.73 billion in 2024, highlight the immense potential in this sector. Renowned consulting firm McKinsey suggests the market could be even larger, estimating an opportunity of up to $2 trillion. In this context, investing in leading cybersecurity stocks could be one astute move for savvy traders. Which stocks stand out in this rapidly evolving market? Here are three top picks, recently spotlighted by analysts at Barclays.

1. Check Point Software (CHKP)

Established in 1993, Check Point Software is a titan in cybersecurity solutions. The company offers a comprehensive suite of products that protects organizations of all sizes from the myriad of cyber threats. With offerings like firewalls, cloud security, and threat prevention, Check Point has consistently performed well, showcasing an average revenue and earnings growth of 5.64% and 2.28%, respectively, over the decade.

Check Point’s Q2 results were particularly noteworthy, with revenues climbing 7% year-over-year to hit $627 million, and earnings per share (EPS) rising 8% to $2.17 — besting estimates. This marked the company’s 15th consecutive quarterly earnings beat! In addition, CHKP reported impressive growth metrics, including a 9.5% year-over-year increase in billings to $620 million.

All the while, Check Point maintains a robust cash balance of $3.1 billion and is actively expanding its AI capabilities to include advanced solutions for combating phishing concerns. With a bullish rating from analysts, Check Point is categorized as a “Moderate Buy,” boasting a mean target price of $192.92 — indicating promising upside potential of approximately 17.5% from current levels.

2. CyberArk Software (CYBR)

Founded in 1999, CyberArk Software specializes in privileged access management (PAM), making it a standout player in the cybersecurity domain. With its stock up 26.6% year-to-date and a market cap of $11.6 billion, CyberArk recently surpassed both revenue and earnings estimates, reporting a staggering 28% year-over-year revenue increase to $224.7 million.

Notably, subscription revenue surged 49% to $158.4 million, while annual recurring revenue (ARR) jumped 33% to $868 million. The company has maintained a strong cash position, ending the quarter with $641 million in cash against a manageable amount of short-term debt at around $120 million.

CyberArk’s growth trajectory seems set to continue as demand for its PAM solutions rises sharply amid increasing cybersecurity threats. Analysts universally rate CYBR as a “Strong Buy,” with an average target price of $310.25, showcasing expected upside potential of around 11% from current levels.

3. Varonis Systems (VRNS)

Launched in 2003, Varonis Systems focuses on data security and analytics, particularly in protecting sensitive data from breaches and insider threats. With a market cap of $6.2 billion and a year-to-date stock performance of 20.6%, Varonis has outperformed expectations in its Q2 results as well. The company’s revenues increased by 12.9% year-over-year to $130.3 million, with adjusted EPS rising to $0.05.

Varonis has demonstrated strong ARR growth, reaching $584.2 million — an 18% increase over the last year. The company is focusing its efforts on its managed data detection business, driving significant adoption of its SaaS offerings, which now make up 36% of total ARR.

The partnership with Microsoft’s AI-driven Copilot stands to bolster Varonis’ market position further, as data security becomes a focal point in AI-related applications. Analysts rate VRNS as a “Moderate Buy,” giving it a mean target price of $58.13, with an anticipated upside of approximately 3.6% from current levels.

Conclusion

The accelerating digital landscape demands proactive security measures, making cybersecurity stocks an appealing investment. Check Point Software, CyberArk Software, and Varonis Systems each offer unique growth prospects backed by encouraging financial metrics and forward-thinking strategies. Stay ahead of this lucrative corner of the tech world and consider these stocks as you refine your trading strategy!