The 3 Most Undervalued Cybersecurity Stocks to Buy in February 2023

Stocks to buy
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Investing in undervalued cybersecurity stocks may be a smart move for investors looking to capitalize on growing demand for cybersecurity solutions. With the increasing threat of cyber attacks, businesses and individuals alike are looking to obtain reliable and secure solutions to protect their data and systems.

A report from McKinsey & Company reveals that the total addressable market size for this industry is estimated between $1.5 trillion and $2 trillion. That’s an amount so large that it’s difficult to fathom. Further, some cybersecurity stocks are able to provide great potential returns on investment due to their low cost of entry and high-growth potential. However, many investors overlook these undervalued cybersecurity stocks as they are not well-known or widely discussed.

Investors interested in gaining exposure to the cybersecurity market should look at companies whose share prices do not yet fully reflect their potential. These undervalued stocks may offer attractive returns over the long haul as the companies benefit from increased demand for their products and services.

What are some of the most promising undervalued cybersecurity stocks today? Consider these three picks:

CrowdStrike (CRWD)

CrowdStrike sign and logo at headquarters in Silicon Valley. CRWD stock.

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CrowdStrike (NASDAQ:CRWD) stock is one of the most undervalued cybersecurity stocks in the market today. It’s an attractive opportunity for those looking for a long-term investment return.

With an innovative cloud-based security platform, this company helps organizations protect their digital assets and information from malicious actors. Its advanced artificial intelligence (AI) powered technology can respond to threats quickly and efficiently, allowing organizations to stay ahead.

CrowdStrike was able to record $2.34 billion in annual recurring revenue (ARR), representing 54% year-over-year (YOY) growth, in the third quarter of 2022. CEO George Kurtz noted the following, despite total net new ARR coming in below expectations:

“CrowdStrike delivered robust growth at scale, strong retention rates, growing module adoption, record net new ARR from emerging products and a record number of customers contributing at least $1 million to net new ARR.”

CrowdStrike’s Q3 performance was an impetus for market growth. Despite increased popularity, though, CRWD stock has dropped by more than 40% in the past six months. This has caused anxiety among investors, who fear that growth may slow in 2023.

ARR usually experiences a boost in the third and fourth quarters of the year, as organizations typically plan their finances during this period. Despite usually experiencing an uptick during particular quarters, 2022 failed to show the same levels of improvement.

Still, the shortage of cybersecurity professionals in the market has made it difficult for organizations to maintain a secure environment. CrowdStrike’s managed services help them avoid potential threats. So, the current weakness is a good time to open a position in CRWD stock.

Fortinet (FTNT)

The Fortinet logo on a wall

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Fortinet (NASDAQ:FTNT) stock is another one of the undervalued cybersecurity stocks in the market right now. As a leader in the industry, the company has built a reputation for providing reliable and secure solutions. Its comprehensive portfolio of products and services — including firewalls, endpoint security and network security solutions — has been widely adopted by businesses across various industries.

FTNT stock remains an attractive choice at this point, especially thanks to its diversified business model. Fortinet’s sales have risen significantly this past year as well, which could result in sustained revenue growth in years to come. Even if product sales slow, service sales should remain steady due to its current success. Additionally, Fortinet has been investing in services to protect remote workers and more.

Despite the possibility of an economic recession, this company is optimistic about its plans for 2023 and beyond. Management’s aggressive goal is to hit $8 billion in revenue by 2025. That translates to a 22% three-year compound annual growth rate (CAGR).

In its Q3 2022 earnings, Fortinet also noted that it had returned some $2 billion year-to-date (YTD) to shareholders through repurchasing shares. The company intends to balance profitable growth and returns for FTNT investors.

With strong fundamentals and growth potential, now is an ideal time for investors to consider this cybersecurity play.

Zscaler (ZS)

Zscaler (ZS) logo on building with parking lot in foreground

Source: Michael Vi / Shutterstock.com

Zscaler (NASDAQ:ZS) is the last undervalued cybersecurity company on this list. With its cloud-based security solutions, the company’s products and services suite helps keep companies safe against a variety of malicious activities. Its analytics capabilities also allow organizations to monitor network traffic in real time and quickly identify potential threats.

The pandemic drove up the value of ZS stock, as its products help ensure secure access to VPNs and cloud workloads. In particular, remote work became commonplace in 2020, benefiting the company in a huge way.

Zscaler has seen tremendous revenue growth as a result. In fiscal 2022, annual revenue reached $1.09 billion, a 62% increase from 2021. The company’s 2021 revenue was $673 million as well, a 56% increase over the previous year. Finally, annual revenue clocked in at $431 million in 2020, a 42% increase from the prior year.

The company has shifted its focus to selling more cybersecurity solutions to smaller enterprises as well, expanding and intensifying the activities of its sales team. These services are currently offered through service providers, helping secure better margins for the company.

Zscaler has become a go-to choice for many organizations looking for effective cybersecurity solutions. Yet, ZS stock is down more than 50% in the last year. With a low stock price compared to other industry players, this is one of the most undervalued cybersecurity stocks today.

On the publication date, Faizan Farooque did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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