The cybersecurity industry has a bright future ahead of it, as there’s no doubting that. According to one forecast, the worldwide cybersecurity market will reach $367 billion by year 2029, with a compound annual growth rate (CAGR) of 13 percent from 2021.
With so much potential available, numerous enterprises are jostling to capture market share. Two of these firms, CrowdStrike (CRWD) and Fortinet (FTNT), top my list of long-term stock choices in this sector. Let’s take a look inside to find out why.
1. CrowdStrike: Growing client base who are spending more
CrowdStrike recently released its fiscal 2023 Q1 (ending April 30) results, and they were excellent. Revenue rose 61% year over year to $488 million, and the firm earned $158 million in free cash flow. CrowdStrike is cash flow positive on a regular basis, which is significant because it isn’t profitable yet. That said, in Q1 2019, Crowdstrike posted a net loss of $31.5 million, compared to a loss of $85 million in the previous year’s fourth quarter.
The more fascinating developments to keep an eye on for CrowdStrike are its subscription clients and how much they spend. At the end of Q1, there were 17,945 subscription customers, up 57% year over year. As of the end of 2021, 65% of Fortune 100 firms and 51% of Fortune 500 firms had joined.
The number of clients that have been acquired appears to be pleased with the services they are receiving, as shown by CrowdStrike’s dollar-based retention rate, which has exceeded the company’s 120 percent threshold for 17 quarters in a row.
2. Fortinet: Under the radar but posting impressive results
Although Fortinet isn’t the first name that springs to mind when it comes to cybersecurity firms, its performance is second to none.
In the first quarter of 2022, which ended on April 30, revenue was up 34% and billings were up 36%. This represented the sixth consecutive quarter of revenue and billing growth greater than 20%. Furthermore, across Fortinet’s many geographic regions, revenue grew dramatically. In the Americas region, revenue increased 32%, while EMEA’s earnings increased 26% and APAC’s profits rose 57%.
Large-scale orders are coming from business clients, who also need higher-end items. The proportion of high-end goods sold in Q1 was 38%, up from 32% in Q2 2021.
Fortinet, like CrowdStrike, has been a market-beating investment so far this year, outperforming the S&P 500 by 2%. The company is currently trading at a P/S ratio of 14, down from its most recent high of 20. While the current stock price may not appear to be as big a discount to prior valuations, Fortinet’s excellent results and guidance make it worth its steep price tag.
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