High-speed internet connectivity help companies improve performance and ensure seamless communication with clients. However, online systems and devices are vulnerable to cyberattacks, and business operations will not accelerate or even suffer financial damage without solid protection.
Because of the growing demand for security services, cybersecurity stocks like Absolute Software (TSX: ABST) and Open Text (TSX: OTEX) are attractive options for long-term and growth investors in May 2023.
Patented technology
The modern workforce uses desktops, laptops, and mobile devices, which are considered endpoints or entry points for cyberattacks. Absolute Software has patented technology that can strengthen governments, enterprises, agencies, educational institutions, and other organizations’ cyber resiliency.
The $606.3 million American-Canadian firm is the lone provider of self-healing, intelligent security solutions globally. Absolute Persistence, a patented technology, is embedded in the firmware of around 600 million devices. The devices have a secure connection between the endpoint and Absolute’s undeletable defence platform.
Its president and chief executive officer (CEO), Christy Wyatt, said Absolute Software would continue to drive market penetration of its self-healing, intelligent security solutions. Management’s long-term plan is to deliver balanced growth and profitability consistent with the Rule of 40 frameworks. The framework targets a combined growth rate and profit margin of more than 40%.
Absolute’s chief financial officer Jim Lejeal believes strong margins should provide attractive growth. He added, “While we are not immune to the macro environment, we remain confident in our ARR (annual recurring revenue) growth outlook.” Also, the ongoing investments in go-to-market initiatives position the company for long-term success.
This stock is a gem since growth-oriented tech companies rarely pay quarterly dividends. At $11.51 per share (-18.19% year to date), the dividend yield is 2.89%. Based on market analysts’ price forecasts, the average return potential in 12 months is 63.9% ($18.86).
Security & Protection Cloud
Open Text’s cloud-based platform of software and solutions consists of five clouds, and the Security and Protection Cloud focuses on data protection, digital forensics, and endpoint security solutions. According to management, companies’ cyber resilience strategy needs to match their growth strategy if they want to be secure from cybersecurity risks.
The $14.99 billion software and cloud company aims to gain a significant market share in the Information Management Market through digital and information transformations. It expects the worldwide market to grow by a compound annual growth rate (CAGR) of 11% to US$208 billion from 2022 to 2026, and cybersecurity should grow by 12% during the period.
Open Text is preparing for total enterprise reinvention by 2030, as it expects all industries to transform and businesses to become digital ecosystems with enhanced cybersecurity capabilities. For fiscal 2024, management targets between 33% and 35% year-over-year revenue growth ($5.9 billion to $6 billion). At $55.41 per share, investors are up 39.1% year to date and enjoy a 2.61% dividend.
Fast-growing industry
The cybersecurity industry is fast-growing due to the over-reliance on the internet, rising incidence of data breaches, and threats from cyber criminals with sophisticated tactics. Endpoint security providers should benefit considerably from this secular growth opportunity.
Absolute Software and Open Text will seize the moment by creating opportunities that should eventually provide them with stability and growth over the long term.
