5 Best Cybersecurity Stocks to Buy Heading into 2023

In this article, we will discuss the 5 best cybersecurity stocks to buy heading into 2023. If you want to read our detailed analysis of the cybersecurity industry and explore similar stocks, you can go to 15 Best Cybersecurity Stocks to Buy Heading into 2023.

5. Okta, Inc. (NASDAQ:OKTA)

Number of Hedge Fund Holders: 47

Okta, Inc. (NASDAQ:OKTA) is an identity and access management company that provides cloud identity solutions to businesses across a range of industries. Okta, Inc. (NASDAQ:OKTA) is well-positioned to continue to grow as more companies move to the cloud and need to secure their data and applications. With its wide range of offerings and its strong customer base, Okta, Inc. (NASDAQ:OKTA) is a leader in the cloud identity and access management space and is placed high on our list of the best cybersecurity stocks to buy now.

Wall Street is bullish on Okta, Inc. (NASDAQ:OKTA). This December, BMO Capital analyst Keith Bachman raised his price target on Okta, Inc. (NASDAQ:OKTA) to $69 from $58 and maintained an Outperform rating on the shares.

At the end of Q3 2022, 47 hedge funds were bullish on Okta, Inc. (NASDAQ:OKTA) and disclosed stakes worth $763.5 million in the company. Of those, Citadel Investment Group was the top investor in the company and disclosed a position worth $87.6 million.

4. Zscaler, Inc. (NASDAQ:ZS)

Number of Hedge Fund Holders: 51

Zscaler, Inc. (NASDAQ:ZS) is a leading cloud security company that provides cloud-based security solutions for organizations of all sizes. The company is an innovator in the cloud security space, providing advanced solutions that can help organizations protect their data, secure their systems, and defend against cyber threats. With its comprehensive suite of cloud security solutions, Zscaler, Inc. (NASDAQ:ZS) is well-positioned to continue to grow and expand in the future and is therefore one of the best cybersecurity stocks to buy now.

On December 1, Zscaler, Inc. (NASDAQ:ZS) posted market-beating earnings for the first quarter of fiscal 2023. The company reported an EPS of $0.29 and outperformed estimates by $0.03. The company’s revenue for the quarter amounted to $355.55 million, up 54.24% year over year and ahead of Wall Street expectations by $14.76 million. Shortly after the company’s earnings release, ZS MKM Partners analyst Catharine Trebnick updated her price target on Zscaler, Inc. (NASDAQ:ZS) to $180 from $190 and reiterated a Buy rating on the shares.

At the close of the third quarter of 2022, 51 hedge funds were long Zscaler, Inc. (NASDAQ:ZS) and held stakes worth $1.33 billion in the company. This is compared to 40 hedge funds in the previous quarter with stakes worth $1.02 billion. The hedge fund sentiment for the stock is positive. As of September 30, D E Shaw is the most prominent shareholder in the company and has a position worth $189.9 million.

Here is what Artisan Partners had to say about Zscaler, Inc. (NASDAQ:ZS) in its third-quarter 2022 investor letter:

“Our notable adds in the quarter included Zscaler, Inc. (NASDAQ:ZS) , Etsy and BioNTech. Zscaler provides cloud-based Internet security solutions. The company recently delivered 61% revenue growth and expects to grow nearly 40% in 2023 (ahead of expectations). Despite solid fundamental momentum, shares have underperformed this year as investors have grown concerned about slowing demand for enterprise software as the broader global economy slows. We believe the dual trends of rising security vulnerability and increased enterprise digitization will lead to sustained demand, even in a recession. Cybersecurity remains a top concern for businesses and governments alike as cyberattacks can have devastating financial and reputational consequences. From 2018 to 2020, losses from cybercrimes grew 67% to $1 trillion, and some estimate it could reach $10 trillion by 2025. Meanwhile, managing the security needs of legacy on-premise applications, a growing number of cloud-based applications (Office 365, Salesforce, etc.) and a more remote workforce (versus pre-pandemic) 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. For these reasons and with shares trading at an attractive discount to our PMV estimate, we added to our position.”

3. Cloudflare, Inc. (NYSE:NET)

Number of Hedge Fund Holders: 53

Cloudflare, Inc. (NYSE:NET) is an internet infrastructure company that provides services to businesses and consumers. The company’s services include content delivery, security, and performance optimization for websites, mobile applications, and network services. The company’s products and services are designed to secure and protect customers’ websites, applications, and APIs from malicious activities, such as DDoS attacks, data breaches, and malicious botnets. Cloudflare, Inc. (NYSE:NET) is placed third on our list of the best cybersecurity stocks to buy now.

Analysts are bullish on Cloudflare, Inc. (NYSE:NET). This November, Cantor Fitzgerald analyst Jonathan Ruykhaver raised his price target on Cloudflare, Inc. (NYSE:NET) to $65 from $55 and reiterated a Neutral rating on the shares. On November 28, JPMorgan analyst Mark Murphy took coverage of Cloudflare, Inc. (NYSE:NET) and upgraded the stock to Neutral from Underweight with a $42 price target.

At the end of Q3 2022, 53 hedge funds disclosed ownership of stakes in Cloudflare, Inc. (NYSE:NET). The total value of these stakes amounted to $629 million, up from $541 million in the previous quarter with 41 positions. The hedge fund sentiment for the stock is positive. As of September 30, Two Sigma Advisors is the top investor in the company and has a position worth $85.5 million.

Here is what Baron Funds had to say about Cloudflare, Inc. (NYSE:NET) in its third-quarter 2022 investor letter:

“We continued to build our position in Cloudflare, Inc. (NYSE:NET) during the quarter as the shares declined with the overall software space and the long-term risk/ reward balance became more compelling. The company reported a strong second quarter, with revenue growth accelerating to 54%, as well as better gross and operating margins. Third quarter guidance was also ahead of Wall Street expectations. Given Cloudflare’s proprietary network and massive global scale, its software products have a disruptive price-performance advantage over competitors. As the company introduces new products as well as disruptive packaging/pricing, its unit level economics should continue to improve over time, with the company already well ahead of its long-term gross margin target of 74%, reporting 78.9% for the second quarter. This drives strong cross/upselling activity with customers, reflected in strong net-dollar expansion rates in excess of 125%. Indeed, in the most recent quarters, customers purchasing five or more products reached 81% of the base, six or more products reached 70% of the base, and seven or more products reached 58% of the base. Enterprise penetration continues to be a key long-term driver, with 1,749 customers now spending over $100,000 annually with the company, growing 61% and now accounting for over 60% of total revenue. With approximately 152,000 paying customers at the end of last quarter, large enterprise customers still represent just 1% of total paid customers and thus a material growth opportunity in the coming years. We continue to have high confidence in the company’s ability to innovate at a rapid pace (announced 20 new products or enhancements in September alone), package and bundle with disruptive pricing, and take material share in its large and growing addressable markets.”

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

Number of Hedge Fund Holders: 85

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leader in cloud-delivered endpoint and workload security solutions, with a rapidly growing customer base. The company’s products are used by Fortune 100 companies and its customer base is growing quickly. With its next-generation technology and expertise, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is positioned to capitalize on the growing demand for cloud security solutions. The company’s Falcon platform leverages artificial intelligence and machine learning to protect organizations from cyber threats, and its solutions are designed to be easy to deploy and manage. The cybersecurity industry is expected to continue to grow, as companies invest in solutions to protect their digital assets. This is a major tailwind for CrowdStrike Holdings, Inc. (NASDAQ:CRWD) and justifies its place on our list of the best cybersecurity stocks to invest in.

Wall Street sees upside to CrowdStrike Holdings, Inc. (NASDAQ:CRWD). This December, Redburn analyst Nina Marques started coverage of CrowdStrike Holdings, Inc. (NASDAQ:CRWD) with a Buy rating and a $175 price target.

At the close of the third quarter of 2022, 85 hedge funds were long CrowdStrike Holdings, Inc. (NASDAQ:CRWD) and disclosed stakes worth $2.97 billion. Of those, Matrix Capital Management was the top shareholder in the company and held a position worth $494.4 million.

Here is what Carillon Tower Advisers had to say about CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its second-quarter 2022 investor letter:

“CrowdStrike Holdings, Inc. (NASDAQ:CRWD), a security software platform for protecting information technology assets and cloud workloads, delivered strong earnings results, with solid recurring revenue, customer growth, and profitability. Some investors, however, hoped for bigger numbers on the annual recurring revenue metric. Additionally, CrowdStrike has shown a desire to continue to hire to fuel growth, and so the expected increase in future profitability will be held back somewhat in the near term. We remain positive on the company’s prospects, as current geopolitical tensions make cyber security mission-critical.”

1. Palo Alto Networks, Inc. (NYSE:PANW)

Number of Hedge Fund Holders: 103

Palo Alto Networks, Inc. (NYSE:PANW) is a leader in the cybersecurity market with a broad product portfolio, a proven track record of innovation, and a strong customer base. The company’s Next-Generation Firewall (NGFW) provides comprehensive security solutions to help customers protect their networks, applications, and data. The company has also been expanding into the cloud security and endpoint security markets, which offer additional growth opportunities. Furthermore, Palo Alto Networks, Inc. (NYSE:PANW) is well-positioned to benefit from the increasing global demand for cybersecurity solutions and is placed high on our rankings of the best cybersecurity stocks to buy now.

On November 17, Palo Alto Networks, Inc. (NYSE:PANW) posted strong earnings for the fiscal first quarter of 2022. The company reported an EPS of $0.83 and outperformed expectations by $0.14. The company’s revenue for the quarter amounted to $1.56 billion, up 25.33% year over year and ahead of revenue estimates by $12.21 million. On December 1, Redburn analyst Nina Marques took coverage of Palo Alto Networks, Inc. (NASDAQ:PANW) with a Buy rating and a $270 price target.

At the end of the third quarter of 2022, 103 hedge funds were eager on Palo Alto Networks, Inc. (NYSE:PANW) and held positions worth $4.20 billion. This is compared to 90 hedge funds in the preceding quarter with stakes worth $3.72 billion. The hedge fund sentiment for the stock is positive. As of September 30, Arrowstreet Capital was the largest investor in the company and held a position worth $464.2 million.

You can also take a look at 11 Best Micro-cap Dividend Stocks To Buy and 15 Best E-Commerce Stocks To Buy.