Cybersecurity remains a prominent sector, witnessing significant demand in the era of rapid AI advancement. The escalating sophistication of threats underscores the critical necessity of cybersecurity, especially for organizations overseeing remote or hybrid work setups. This need is particularly pronounced in the expanding realm of zero trust security protocols.
In contrast to many industries, identifying undervalued cybersecurity stocks through conventional metrics poses challenges. The sector has experienced a substantial influx of capital over the past year, reflected in a median price-to-earnings (P/E) ratio of around 32x, surpassing the S&P 500 benchmark.
Moreover, numerous cybersecurity firms are yet to achieve profitability. Hence, evaluating the most undervalued cybersecurity stocks for investment in April 2024 is crucial.
ZScaler (ZS)
Headquartered in San Jose, California, Zscaler (NYSE: ZS) offers a Zero-Trust platform designed to combat the evolving threats stemming from generative AI. Unlike conventional phishing schemes of the recent past, generative AI generates highly realistic content capable of deceiving even vigilant employees.
Zscaler’s platform integrates identity security measures that treat every online login as a potential threat (zero trust approach). It scrutinizes user credentials, including location and device details, while its Zero Trust Exchange restricts employee access to essential applications, preventing network-wide breaches.
While Zscaler’s stock has surged by 64% this year, a recent 20% pullback following positive earnings results has enhanced its investment appeal.
Okta (OKTA)
Okta (NASDAQ: OKTA) advocates countering AI-related threats through AI-powered solutions. In October 2023, Okta launched its Okta Workforce Identity Cloud, leveraging Okta AI to continuously evaluate user risk during active sessions and proactively address identity threats across the network.
Despite a modest 20% increase in the past year, OKTA stock dipped by 2.5% post a robust earnings report. However, a wave of analyst endorsements and price target revisions post-earnings suggests a promising outlook for Okta.
Tenable Holdings (TENB)
Tenable Holdings (NYSE: TENB) boasts a substantial customer base of 44,000 clients, encompassing 65% of the Fortune 500 companies. This customer breadth underscores the significant market potential within this sector.
Similar to its counterparts, Tenable Holdings has exhibited robust year-over-year revenue and earnings growth. Following its recent earnings report, multiple analysts upgraded their ratings and price targets for TENB stock.
A notable endorsement came from Needham & Company on March 19, 2024, reaffirming a buy rating and a price target of $62 for TENB stock. This announcement coincided with Tenable’s expansion of its Tenable Cloud Security platform to support Kubernetes across on-premises and public cloud environments.
(Disclaimer: The author, Chris Markoch, does not hold any positions in the securities mentioned. The views expressed are in accordance with InvestorPlace.com Publishing Guidelines.)
Chris Markoch, a seasoned financial copywriter, has been analyzing the market for over five years. His contributions to InvestorPlace since 2019 have provided valuable insights into the financial landscape.
