10 Cybersecurity Stocks to Watch Amid Russian Invasion of Ukraine

In this article, we discuss the 10 cybersecurity stocks to watch amid the Russian invasion of Ukraine.

The Russian invasion of Ukraine has sent jitters throughout the world economy. Russian stocks plunged 33% since President Putin ordered troops into Ukraine, and crude oil jumped up to $105 per barrel for the first time in 8 years. Geopolitical tensions and uncertainty over the outcome of this conflict resulted in sell-offs in major markets around the world and gave a boost to commodities and safe-havens, as well as government bonds. With Western nations imposing severe financial sanctions on Russia, the turmoil may continue to ravage its effects on the globe’s economy.

In these bleak times, one segment in the technology sector brings positive news. As Russia fights to take control of Ukraine’s capital Kyiv, analysts feel cyberattacks by the world’s 11th largest economy will ramp up, and add an extra level of threat to Ukraine’s infrastructure. Several Ukrainian government websites and banks were affected by a cyberattack on Wednesday, and with an increase in hostility with each passing day, the cyber-sphere remains a vulnerability Russia will certainly continue to exploit. Not just with Ukraine, Russia is also expected to retaliate against sanctions imposed by Western nations by launching a series of cyberattacks against them, which should force companies and government organizations in the US and Europe to shore up their cyber defenses.

Cybersecurity is a sector poised to grow, as internet-based companies and infrastructure gives bad actors more room for data breaches and hacks. A report by Cybersecurity Ventures expects cybercrime costs around the globe to increase 15% per year to reach $10.5 trillion by 2025, a significant increase from $3 trillion in 2015. A survey of more than 2,000 Chief Information Officers gathered that cybersecurity was their top priority for new spending.

US President Joe Biden also regards cybersecurity as one of the most important aspects of national security, stating in July:

“I think it’s more than likely we’re going to end up, if we end up in a war – a real shooting war with a major power – it’s going to be as a consequence of a cyber breach of great consequence and it’s (the threat) increasing exponentially.”

With war in Ukraine raging, on both the military and cyber fronts, many feel concerned that there could be a spillover into Ukraine’s European neighbors, which are connected digitally with the country. Banks around Europe and US have now been advised to ready themselves for potential cyberattacks by Russia, feeding more fuel to the cybersecurity stock hype. Wedbush Securities analyst Dan Ives holds that concerns over cyberattacks to critical infrastructure companies could boost 200 to 300 basis points to the cybersecurity sector. He added:

“With significantly elevated cyber attacks now on the horizon, we believe added growth tailwinds for the cybersecurity sector and well-positioned vendors should be a focus sector for investors during this market turmoil.”

International hacking collective Anonymous, which has conducted hacking campaigns against governments and corporations in the past, declared a cyberwar against Russia for initiating a war. The website of state-owned Russian media outlet RT News went offline after an attack seemingly claimed by the decentralized hacking group. This further goes to show how big of a role cyber-warfare, and consequently cybersecurity, will play in conflicts around the world.

Some of the top cybersecurity stocks to watch include Palo Alto Networks, Inc. (NASDAQ:PANW), Tenable Holdings, Inc. (NASDAQ:TENB), and Zscaler, Inc. (NASDAQ:ZS), along with others mentioned below.

Photo by Jefferson Santos on Unsplash

Our Methodology

We picked cybersecurity stocks that were recently given positive analyst ratings. These stocks are also set to benefit from the growth in the cybersecurity sector. Business fundamentals around each stock have also been provided. Hedge fund sentiment around each stock has also been mentioned, which was derived from the database of 924 elite funds tracked by Insider Monkey as of Q4 2021.

10 Cybersecurity Stocks to Watch Amid Russian Invasion of Ukraine

10. Telos Corporation (NASDAQ:TLS)

Number of Hedge Fund Holders: 13

Telos Corporation (NASDAQ:TLS) starts off our list of the top cybersecurity stocks to buy amid the Russian invasion of Ukraine. It is a Virginia-based firm offering a range of cybersecurity services including cyber risk management and compliance, secure mobility, identity management, and information technology and enterprise solutions. 13 hedge funds out of 924 tracked by Insider Monkey in the fourth quarter of 2021 recorded bullish bets on Telos Corporation, with combined stakes worth $49.34 million. This is in comparison to 12 hedge funds with positions worth $182.4 million in Telos Corporation at the close of Q3 2021.

On February 25, Telos Corporation announced a one-year extension to its contract with the National Security Agency (NSA) worth $1.5 million. This agreement builds on the company’s 14-year partnership with the NSA, and will include the upgrade of its Xacta solution to the Xacta 360.

On January 25, Telos Corporation was selected by Oracle (NYSE:ORCL) for management and automation of security compliance at multiple classification levels, by using the company’s enterprise cyber risk management platform Xacta. Earlier in the month, Catharine Trebnick of research firm Colliers upgraded Telos Corporation to ‘Buy’ from ‘Neutral’, setting a $20 price target.

Masters Capital Management was a leading shareholder of Telos Corporation in the fourth quarter of 2021, with 1.5 million shares worth $23.13 million, representing a 0.93% slice of the fund’s overall portfolio, and a 42% increase in holding from the previous quarter.

In addition to Palo Alto Networks, Inc., Tenable Holdings, Inc., and Zscaler, Inc., Telos Corporation is a trending cybersecurity stock to watch amid the Russian invasion of Ukraine.

9. Mandiant, Inc. (NASDAQ:MNDT)

Number of Hedge Fund Holders: 22

Up next is Mandiant, Inc. (NASDAQ:MNDT), which operates as a firm offering intelligence-based cybersecurity solutions, including threat intelligence, security validation, and automated alert investigation. Investor confidence has been up on California-based Mandiant, Inc., with 22 hedge funds holding positions in the company at the close of the fourth quarter, up from 19 hedge funds in the preceding quarter.

In February, Mandiant, Inc. announced a strategic partnership with SentinelOne (NYSE:S) to help firms shore up their cyber-defense abilities, and reduce their risk of data breaches. This will allow Mandiant, Inc.’s (NASDAQ:MNDT) incident responders to use SentinelOne’s (NYSE:S) Singularity XDR platform in order to investigate cyber attacks.

In February, Mandiant, Inc. said ‘no comments’ to news of a possible merger with Microsoft Corporation (NASDAQ:MSFT). Shares have spiked over this possibility and the Russian invasion of Ukraine, gaining 21.20% in the last month and 6.33% in the last 5 days, as of February 25.

Reporting its fourth-quarter earnings on February 8, Mandiant, Inc. posted EPS of -$0.10, beating estimates by $0.03. Quarterly revenue of $132.89 million was also above estimates by $1.31 million.

8. Qualys, Inc. (NASDAQ:QLYS)

Number of Hedge Fund Holders: 23

Qualys, Inc. (NASDAQ:QLYS) offers cloud-based IT security and compliance solutions and is based in California. The company provides vulnerability management through its Qualys Cloud Apps, which identifies and corrects vulnerabilities present in a system to prevent hackers from exploiting them. Vulnerability Management is one of the top priorities of spending in the IT sector, and Qualys, Inc. is set to benefit from this trend. As of February 25, the firm gained 19.83% in the last 12 months, and 5.68% in the last 5 days as the Russian forces have rolled into Ukraine, putting cybersecurity stocks in the limelight.

On February 22, JMP Securities analyst Trevor Walsh assumed coverage of Qualys, Inc. with a ‘Market Perform’ rating and no price target, noting that the company retains its leadership in the Vulnerability Management market. For Q4 2021, Qualys, Inc. posted an EPS of $0.84, beating consensus estimates by $0.04. Revenue of $109.78 million for the fourth quarter also outperformed estimates by $1.31 million.

On November 29, Qualys, Inc. announced that it had achieved the AWS Graviton Ready designation, which is part of the Amazon.com (NASDAQ:AMZN) Web Services (AWS), Service Ready Program. This recognizes the successful integration of the company’s Qualys Cloud Agent with AWS Graviton Service, which will allow joint customers to use Amazon’s AWS Graviton2 ARM architecture and Qualys’ Cloud Platform to secure their critical assets within single security, IT, and compliance platform.

Investors were seen bullish on Qualys, Inc. in the fourth quarter of 2021, with 23 hedge funds holding stakes worth $305.78 million in the company. In contrast, 18 hedge funds held positions worth $220.91 million in Qualys, Inc. at the close of the third quarter. Fundsmith LLP was the leading shareholder in Qualys, Inc. at the end of the fourth quarter, holding 1.07 million shares amounting to a value of $147.21 million.

Baron Funds, an investment firm, mentioned Qualys, Inc. in its Q3 2021 investor letter. Here’s what the fund said:

“We added to our position in Qualys, Inc., a provider of cybersecurity software that protects endpoints by ensuring that all devices on a network are mapped out (asset view and inventory), that software configurations are up to date on those devices (vulnerability management (“VM”)) and that the settings on the devices are in compliance with corporate policies (policy compliance (“PC”)). The company generates significant free cash flow from its legacy VM and PC products, and it has been working on new products that extend its knowledge of the information within its customers’ networks. These products fit into the endpoint detection and response (“EDR”) category and can be very powerful tools, as they use artificial intelligence to detect improper network intrusions and then automate defensive responses to them. From our due diligence, we believe that the Qualys EDR system is starting to gain traction at its enterprise customers, which would help to re-accelerate the company’s top-line growth from the low teens percentage growth, back to the high teens or even over 20% growth. Our purchases were made at what we believe were favorable valuations. We also believe that Qualys would be an interesting takeover target for another cybersecurity company given its high margins, significant free cash flow, premium market positioning, and fully cloud-delivered service, which would make integration into another company fairly seamless.”

7. CyberArk Software Ltd. (NASDAQ:CYBR)

Number of Hedge Fund Holders: 28

CyberArk Software Ltd. (NASDAQ:CYBR) is up next on the list of cybersecurity stocks to watch as Russia invades Ukraine. The Israeli company develops software security solutions that secure safe access and privileged access management. As industries around the world undergo digital transformation and applications are moving to cloud systems, CyberArk Software Ltd.’s (NASDAQ:CYBR) products are seeing increased demand as securing privileged access becomes a critical point of safety. The company is successfully completing its transition to a subscription-based model for its services and is well-positioned to enjoy secular growth trends. As of February 25, shares of CyberArk Software Ltd. have gained 10.12% in the last month, and 9.76% in the last 5 days.

On February 22, JMP Securities analyst Trevor Walsh assumed coverage of CyberArk Software Ltd. with an ‘Outperform’ rating and revised the price target to $175 from $214. Walsh noted positive expectations for the company given the increasing importance of identity solutions amid the growing demand for developer-centric security solutions and attributed the reduction in price target to the bearish sentiment in the broader tech sector over the last few months.

CyberArk Software Ltd. posted an EPS of $0.28 for the fourth quarter, surpassing estimates by $0.12. $151.32 million in revenue for the fourth quarter also came in $6.84 million above analysts’ forecasts.

Investors were eager on CyberArk Software Ltd. stock at the close of the fourth quarter, with 28 hedge funds holding positions in the company, up from 20 hedge funds in Q3 2021. With 1.12 million shares worth $194.14 million, RGM Capital was the leading shareholder in CyberArk Software Ltd. at the end of the fourth quarter.

Investment firm Harding Loevner talked about CyberArk Software Ltd. in its investor letter for the third quarter of 2021, stating:

“By sector, stock selection in Information Technology (IT) and Health Care led performance, while our Industrials holdings lagged. In IT, security company Cyberark reported accelerating revenue growth for its subscription software, a sign that the company’s decision to transition away from a traditional software licensing business model was wise.”

6. Zscaler, Inc. (NASDAQ:ZS)

Number of Hedge Fund Holders: 31

Zscaler, Inc. is a California-based cybersecurity firm, offering internet access solutions that allow users secure access to externally managed applications.

Research firms Citi, Canaccord, and Deutsche Bank all have ‘Buy’ ratings on Zscaler, Inc. stock, given its Q4 earnings beat. EPS came in at $0.13 for the fourth quarter, above estimates by $0.02. Quarterly revenue of $255.56 million also outperformed estimates by $13.69 million. Analyst T. Michael Walkley of Canaccord, with a ‘Buy’ rating on Zscaler, Inc., believes cybersecurity spending within the software space shows several long-term growth trends.

In January, Stifel analyst Adam Borg noted that Zscaler, Inc. has ‘significantly broadened’ its platform with secure web gateway roots which provide secure access to the internet and software-as-a-service apps. Borg believes that firm is poised to enjoy above 30% growth in the coming years, and gave it a ‘Buy’ rating and a $335 price target.

31 hedge funds were bullish on Zscaler, Inc. in the fourth quarter of 2021, in comparison to 38 hedge funds in the preceding quarter. With 1.67 million shares worth $538.82 million, Arrowstreet Capital is the leading shareholder of Zscaler, Inc. at the end of the fourth quarter.

Artisan Partners Limited Partnership, an investment firm, mentioned Zscaler, Inc. in its Q4 2020 investor letter, stating:

“We also exited our investment in Zscaler. Zscaler provides cloudbased Internet security solutions. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. Furthermore, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a remote workforce make operating IT infrastructures increasingly complex. Zscaler’s scalable, cloud-based security platform is a more secure and efficient way to connect users and applications, which eliminates the need for several layers of security (firewalls, VPNs, etc.) developed and built over the last couple of decades. While the pandemic crisis is likely disrupting some areas of Zscaler’s new sales funnel, the company is particularly well-suited to scale and accelerate our market share-gain thesis. Ninety percent of employees are remotely connecting to the enterprise IT network in today’s inverted world, as opposed to prior solutions which are geared to support 10%-20% of workers connecting remotely with the rest connecting from within the walls of a corporate network. Many employees have used traditional VPN connections to log into their networks remotely, but Zscaler’s platform offers a more secure connection without exposing an entire internal network, is easier to configure and is less costly to operate at scale. While the trend toward connecting remote devices over the Internet backbone remains firmly in motion, the stock appreciated over 300% in 2020, quickly outgrowing our small-cap market cap mandate, and we ended our successful campaign.”

Along with Palo Alto Networks, Inc. and Tenable Holdings, Inc., Zscaler, Inc. is one of the most exciting cybersecurity stocks to watch as Russia attacks Ukraine.

5. Fortinet, Inc. (NASDAQ:FTNT)

Number of Hedge Fund Holders: 31

Fortinet, Inc. is a California-based provider of cybersecurity services, including intrusion prevention, anti-malware, firewall, virtual private network, web filtering, anti-spam and application control services. On February 4, Wedbush analyst Daniel Ives reiterated an ‘Outperform’ rating on Fortinet, Inc. shares, noting that the company’s Q4 earnings beat expectations, with billings coming in at $1.31 billion, signifying a 36% year-over-year growth. Fortinet, Inc.’s (NASDAQ:FTNT) guidance for 2022 is above expectations, Ives said, highlighting the company’s momentum heading into the year.

EPS for Q4 2021 came in at $1.23, above consensus estimates by $0.08. Quarterly revenue was recorded at $963.60 million, beating analysts’ forecasts by $2.08 million.

31 hedge funds were bullish on Fortinet, Inc. at the end of the fourth quarter, with combined holdings worth $1.32 billion. This is down from 38 hedge funds holding $1.13 billion worth of stakes in Fortinet, Inc. at the end of Q3 2021.

ClearBridge Investments, an investment firm, mentioned many stocks in its Q3 2021 investor letter, and Fortinet, Inc. was one of them. Here’s what the fund said:

“Performance among our cohort of IT and Internet companies was mixed, with enterprise software makers thriving while more consumer-oriented stocks faced headwinds. Cyber security software maker Fortinet benefited from a heightened awareness of the need to protect against sophisticated attacks. We are attracted to the recurring revenue nature of these software companies that are increasingly delivering their products on a subscription basis through the cloud. Software business models also tend to avoid many of the inflationary issues facing companies with a physical product or
service.”

4. Tenable Holdings, Inc. (NASDAQ:TENB)

Number of Hedge Fund Holders: 33

Tenable Holdings, Inc. is next up on our list of the cybersecurity stocks to watch amid the Russian invasion of Ukraine. Hedge fund sentiment was positive on Tenable Holdings, Inc. in the fourth quarter, where 33 hedge funds reported holding shares in the company, up from 29 in the preceding quarter. The leading shareholder of Tenable Holdings, Inc. in the fourth quarter was RGM Capital, with 3.36 million shares valued at $185.14 million.

On January 18, research firm Wedbush added Tenable Holdings, Inc. to its ‘Best Ideas List’ and gave it an ‘Outperform’ rating. The firm noted that the company’s product efforts and driver of new sales are now ‘hitting a new gear’ and resulting in a stronger pipeline of deals, as the company’s cloud-based tenable.ep and tenable.io platforms are increasingly being adopted by more enterprise customers heading into 2022.

The company’s EPS for Q4 was recorded at $0.05, above consensus estimates by $0.03. Quarterly revenue was also above analysts’ forecasts by $4.47 million, coming in at $149.02 million and signifying a 26% year-over-year increase.

3. Varonis Systems, Inc. (NASDAQ:VRNS)

Number of Hedge Fund Holders: 33

Varonis Systems, Inc. (NASDAQ:VRNS) is a New York-based company that provides data security and analytics services and allows firms to manage and secure enterprise data.

On February 8, Craig-Hallum analyst Chad Bennett maintained a ‘Buy’ rating on Varonis Systems, Inc. shares, whilst lowering the firm’s price target on the company to $65 from $80, citing a broader software multiple compression as a reason for the price target downgrade. The analyst noted that Varonis Systems, Inc. stock continued to outperform, breaking Q4 guidance estimates in subscription revenue, total revenue, and income estimates. EPS was recorded at $0.16 for Q4, beating estimates by $0.03. Quarterly revenue stood at $126.58 million, surpassing estimates by $4.60 million.

Wedbush analyst Daniel Ives also kept an ‘Outperform’ rating on Varonis Systems, Inc. shares, noting that the company continues to take market share and expand its client base, and posted a healthy 2022 guidance above analysts’ expectations.

Investors were keen on Varonis Systems, Inc. stock at the close of the fourth quarter, where 33 hedge funds held combined stakes worth $294.8 million in the company. This is up from 27 hedge funds holding positions worth $298.4 million in Varonis Systems, Inc. at the close of Q3 2021. Among the hedge funds being tracked by Insider Monkey, Tremblant Capital is a leading shareholder in Varonis Systems, Inc. in the fourth quarter, with 1.85 million shares worth more than $90 million.

2. Palo Alto Networks, Inc. (NASDAQ:PANW)

Number of Hedge Fund Holders: 73

Palo Alto Networks, Inc. offers cybersecurity solutions including cloud security, firewall software, security analytics, and automation, threat intelligence, and cyber security consulting.

On February 23, BMO Capital analyst Keith Bachman raised the firm’s price target on Palo Alto Networks, Inc. to $630 from $615 and maintained an ‘Outperform’ rating, noting that the company offers solid growth potential combined with a “reasonable and defensible” free cash flow valuation. In January, research firm Wedbush added Palo Alto Networks, Inc. to its ‘Best Ideas List’ and gave it an ‘Outperform’ rating, noting a strong upward trajectory for the company as the market starts to fully appreciate the cloud transformation underway in 2022 and beyond.

As of February 25, Palo Alto Networks, Inc. gained 46.08% in the last 12 months, and 7.09% in the last one month, with shares trading at $569.75 on the NASDAQ stock exchange. EPS for Q4 came in at $1.74, above analysts’ expectations by $0.09. Palo Alto Networks, Inc. raked in $1.32 billion in revenue for the fourth quarter, which beat consensus estimates by $35.21 million.

As of the fourth quarter, 73 out of 924 hedge funds were long Palo Alto Networks, Inc., with a combined stake value of $6.47 billion. The same number of hedge funds held $5.89 billion worth of stakes in the company in the quarter before.

1. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Number of Hedge Fund Holders: 74

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a Texas-based cybersecurity firm that offers cloud-delivered protection across endpoints, cloud workloads, threat intelligence, managed security services, and IT operations management services.

In January, research firms Wells Fargo and Oppenheimer both added CrowdStrike Holdings, Inc. to their list of ‘Top Picks’ for 2022, with ‘Overweight’ and ‘Outperform’ ratings, respectively. Andrew Nowinski of Wells Fargo sees CrowdStrike Holdings, Inc. continuing to take market share with ‘one of the most comprehensive platforms in the industry, while Oppenheimer analyst Ittai Kidron sees the company has grown into a ‘best-of-platform’ security vendor which can sustain its strong revenue growth.

Out of 924 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2021, 74 were seen bullish on CrowdStrike Holdings, Inc., the same number of hedge funds as the quarter before.

Carillon Tower Advisers, an investment firm, talked about CrowdStrike Holdings, Inc. in its Q4 2021 investor letter, stating:

“CrowdStrike, a security software platform with leadership in protecting endpoints such as servers, computers, and other IT assets, delivered strong earnings results with exceptional recurring revenue and new customer growth. The firm’s shares were pressured in the quarter as valuation multiple compression punished high-growth stocks in a meaningful way. However, we don’t believe this to be company-specific and expect the firm to continue to execute well and exhibit positive fundamentals.”

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