Is the Story Over for CrowdStrike and other Cyber Stocks?

On July 20, 2024, an unprecedented IT outage hit the world. Airports, banks and even healthcare systems faced massive disruptions due to a flawed software update by cybersecurity firm CrowdStrike. The update impacted customers using Microsoft Windows in what is being termed the “biggest IT outage of all time.” Microsoft has estimated that the outage impacted 8.5 million Windows devices.

CrowdStrike’s stock plunged over 11% following the news, despite CEO George Kurtz releasing a statement that said, “This is not a security incident or cyberattack. The issue has been identified, isolated and a fix has been deployed.” Kurtz also assures that the defect was only in one content update and the problem was fixed quickly.

What does all this mean for CrowdStrike and other cybersecurity stocks?

The Impact of the CrowdStrike-Led Outage

The stock market closed on July 20, with CrowdStrike down 11.1% to $304.96. The company’s closest competitors, however, gained from this sell-off, with SentinelOne up 7.9% to $21.72 and Palo Alto rising 2.2% to $330.89. But US indices were hit by the IT outage.  The S&P 500 and tech-heavy Nasdaq registered their worst week since April 2024, while the Dow continued its streak of hitting all-time closing highs through the week.

The small-cap Russell 2000 index, which has benefited from the recent trend of investors pivoting away from mega-caps, declined modestly. The CBOE Market Volatility Index (VIX), considered a benchmark for investor anxiety, rose to its highest since its record high of late April.

Although CrowdStrike went into a downward spiral on July 20, the stock is up 103.66% over the 12 months and 23.52% YTD, as of July 22, 2024.

Cybersecurity Stocks are Still a Buy

Despite the outage debacle, the long-term story remains intact for CrowdStrike and other cybersecurity stocks. This is apparent from Acuity’s AssetIQ widget, which indicates a very bullish sentiment towards the stock.

So, the current sell-off could be an opportunity to buy the dip for investors looking to get in on the cybersecurity action.

This sector has had a remarkable run over the past 12 months, with the Global X Cybersecurity ETF rallying over 22% during the same period. Cybersecurity stocks are expected to continue their strong performance, against a backdrop of evolving cyber threats. A Gartner survey shows that CIOs see cybersecurity as their highest priority, with 80% intending to increase security spending in 2024.

So, which cyber stocks should investors keep an eye on, apart from CrowdStrike? Here’s a look.

Palo Alto Networks (NASDAQ: PANW)

One of the largest providers of cybersecurity solutions in the world, Palo Alto’s market cap stood at 107.14 billion as of July 22, 2024, with the stock up almost 36% over the past 12 months. The company invests about $1 billion annually in research and development (R&D), 2x to 5x more than its pure-play rivals. This allows Palo Alto to release multiple upgrades, updates and new systems.

The company’s investments are paying off, given that it reported its fiscal Q2 revenue up 19% to $2 billion, while billings rose 16% to $2.4 billion. Acuity’s AssetIQ widget confirms a bullish opportunity for one of the most promising cybersecurity stocks on Wall Street.

Fortinet Inc. (NASDAQ: FTNT)

With a market cap of $44.68 billion and the stock up 1.21% YTD, as of July 22, Fortinet offers a comprehensive range of security solutions, including intrusion prevention systems, firewalls, data leak prevention, secure web gateways and virtual private networks (VPNs).

Fortinet reported a 20% y-o-y increase in revenue for 223 to $5.3 billion, with a 28% rise in service revenue to $3.4 billion. A majority of the over 730,000 customers of Fortinet belong to the Fortune 500 and Global 2000 lists. While the fundamentals are strong, the market is currently seeing a bearish trend, according to Acuity’s AssetIQ widget. Could this be a good time to buy?

CyberArk Software (NASDAQ: CYBR)

The developer of identity security systems has been witnessing an amazing run with the stock up over 65% over the past 12 months and a market cap of $10.99 billion, as of July 22, 2024. CyberArk’s wide range of solutions include multi-factor authentication, single sign-on, lifecycle management and directory services, along with a bouquet of analytics solutions.

With over 8,000 clients across 110 countries, more than half of the company's customers belong to the Fortune 500 club and about 35% to Global 2000. Investors believe in the company’s growth potential, with Acuity AssetIQ indicating a bullish opportunity in the stock.

Okta Inc. (NASDAQ: OKTA)

The leading identity and access management solutions provider has a market cap of $15.82 billion, while its stock is up almost 34% over the past 12 months, as of July 22, 2024. With a robust ecosystem, the company boasts around 7,000 pre-built integrations, as of 2024, while the growing trend of hybrid workforces is driving the demand for cybersecurity solutions for external applications and systems.

OpenAI, the creator of ChatGPT, is among the almost 19,000 customers served by Okta. Acuity’s AssetIQ widget confirms that the stock is witnessing positive market sentiment.

Cybersecurity stocks have had a terrific run over the past 12 months or so. Despite the rally, these stocks could offer plenty of opportunities for traders and investors, with the cybersecurity market expected to reach almost $425 billion by 2030, nearly 2.5X the 2023 valuation, as per Fortune Business Insights.