Top 3 Cybersecurity Stocks to Invest in for the Bull Market of March 2024

It’s projected that global IT spending will reach $5.1 trillion by 2024 as the IT market continues to expand. This growth highlights the critical importance of cybersecurity in defending against cyber threats.

The cybersecurity industry has been experiencing substantial growth, making it an attractive sector for investment with potential multibagger returns. The global cybersecurity market was valued at $190.4 billion in 2023 and is projected to reach $298.5 billion by 2028, indicating significant growth opportunities for leading cybersecurity companies.

This article discusses three cybersecurity stocks with high-growth potential that are poised to deliver strong free cash flows over the next five years. Let’s explore the market potential and reasons to consider investing in these stocks.

CrowdStrike Holdings (CRWD)

Person holding smartphone with logo of US software company CrowdStrike Holdings Inc. (CRWD) on screen in front of website. Focus on phone display. Unmodified photo.

CrowdStrike Holdings (NASDAQ:CRWD) stands out as a top cybersecurity stock to consider. With a 150% surge in the last 12 months, CRWD stock presents a promising growth trajectory.

The company offers global cybersecurity solutions with a focus on cloud-delivered protection for endpoints, cloud workloads, identity, and data. Notably, CrowdStrike recently collaborated with Nvidia (NASDAQ:NVDA) to leverage AI in cybersecurity, enhancing its service offerings for enterprise clients.

In addition to robust revenue growth, CrowdStrike reported a strong free cash flow of $938 million in FY24. With a $225 billion total addressable market projected by 2028, the company is poised to generate significant cash flows in the next five years. Subscription revenue saw a 36% year-on-year increase in FY24, reaching $2.9 billion.

Overall, CrowdStrike’s business plays a crucial role in the technology sector, with sustained healthy growth and expanding cash flows likely to positively impact its market valuation.

Cloudflare (NET)

The logo of Cloudflare, (NET) an US web infrastructure & security company, its website on iOS.

Cloudflare (NYSE:NET) has seen a 73% increase in returns over the last 12 months, signaling an upward trend. Corrections present an opportunity to consider exposure to NET for potential multibagger returns over a five-year investment horizon.

Cloudflare offers integrated cloud-based security solutions targeting various platforms, including public cloud, private cloud, on-premise, and IoT devices. The company reports blocking 182 billion cyber threats daily, showcasing the scale of its operations.

With a total addressable market of $204 billion by 2026, Cloudflare has substantial growth potential. Moreover, 48% of the company’s revenue comes from international markets, indicating room for expansion into new geographies.

Cloudflare’s operating margin expanded by 500 basis points to 9% in 2023, with expectations of maintaining a similar margin this year. This, coupled with strong revenue growth, positions the company for increased cash flow in the future.

Datadog (DDOG)

The Datadog (DDOG) logo displayed on a laptop screen.

Datadog (NASDAQ:DDOG) is positioned as a cybersecurity stock with potential for multibagger returns. DDOG stock has been on an uptrend, with expectations of continued growth in the years ahead.

Datadog serves as the observability and security platform for cloud applications, offering solutions for cloud and application security management, application vulnerability management, cloud service management, product analytics, and software security.

The current cloud market is valued at $560 billion and is projected to grow at a CAGR of 20% through 2027, presenting a significant opportunity for platforms like Datadog. The observability market reached $51 billion in 2023, with the cloud security market valued at $21 billion.

In terms of financial performance, Datadog reported a 27% year-on-year revenue growth to $2.13 billion in 2023, with a free cash flow margin of 28%. The company ended the year with a cash balance of $2.6 billion, providing financial flexibility for future investments in growth and innovation.

Disclaimer: Faisal Humayun has no positions in the mentioned securities. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Faisal Humayun, a seasoned research analyst with expertise in credit research, equity research, and financial modeling, has authored over 1,500 articles focusing on technology, energy, and commodities sectors.

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