Investors should always consider gaining exposure to companies part of rapidly expanding addressable markets such as cybersecurity, as they have the potential to increase revenue and earnings at a consistent pace while delivering outsized gains.
A report from MarketsandMarkets estimates the global cyber security market to be valued at US$266 billion by 2027, up from US$173.5 billion in 2022, indicating annual growth rates of almost 9%.
The increase in the number of data breaches, rising digitalization, and the shift towards remote work should act as tailwinds for cybersecurity companies in the upcoming decade. So, here are two top cybersecurity stocks investors can buy in April 2023.
CrowdStrike stock
One of the fastest-growing tech stocks globally and a cybersecurity giant, CrowdStrike (NASDAQ: CRWD) should be a part of your watchlist right now. Valued at a market cap of US$32 billion, CrowdStrike reported sales of US$2.24 billion in fiscal 2023 (ended in January).
The company continues to expand its suite of products and services. Earlier this month, it launched the CrowdStrike Falcon Insight for IoT (Internet of Things), an offering that detects and responds to cyberthreats on connected devices. This solution makes it easier for enterprises to secure their platform across IT endpoints, cloud workloads, and connected devices.
CrowdStrike offers end-to-end protection allowing it to onboard 23,019 customers to date. A widening customer base and strong engagement rates have allowed the cybersecurity giant to increase its sales by 80% annually in the last five fiscal years.
The number of customers spending between US$100,000 and US$1 million annually on CrowdStrike has risen to 3,553 in fiscal 2023, up from just 262 in fiscal 2018, showcasing the robust demand for the company’s products.
This brisk acceleration in the top line has allowed CrowdStrike to improve its profit margins and report adjusted earnings of US$1.54 per share in fiscal 2023. Analysts forecast earnings to touch $2.33 per share in fiscal 2024, indicating a forward price-to-earnings multiple of 58, which is quite steep.
But Wall Street remains bullish on CRWD stock and expects shares to gain 28% in the next 12 months.
Absolute Software stock
A small-cap TSX stock that pays you a dividend, Absolute Software (TSX: ABST) has returned 151% in the last 10 years. Down 46% from all-time highs, ABST stock is valued at a market cap of $580 million.
In the fourth quarter of 2022, Absolute Software reported adjusted sales of $57.7 million, an increase of 9% year over year. However, its annual recurring revenue, or ARR, was up 15%, driven by strong government spending, which accounted for 79% of total ARR.
The company expects revenue to grow between 10% and 12% year over year in 2023 and forecasts an adjusted earnings before interest, taxes, depreciation, and amortization margin between 23% and 25%.
So, ABST stock is priced at less than two times forward sales, which is cheap for a growth stock. Moreover, it continues to maintain profit margins amid a difficult macro environment and lengthening sales cycles.
Bay Street analysts tracking ABST stock expect it to gain over 80% in the next 12 months, making it an enticing bet in April 2023.
