The biggest near-term threat to businesses may not be recession or climate change. According to research firm McKinsey & Company, the cost of cyberattacks is expected to reach $10.5 trillion every year from 2025 onwards, three times more than in 2015.
As a result, McKinsey believes companies will need to spend a total of $2 trillion annually on cybersecurity software to protect themselves. But there’s a problem. They plan to spend just $189 billion in 2023. This is a $1.8 trillion spending gap, but this gap is likely to close over time. do not have Payments for adequate protection are skyrocketing.
cloud strike (CRWD -0.66%) and sentinel one (S 0.29%) are two of the leading providers of cybersecurity tools and will benefit from this trend. While the companies’ stocks have soared this year, they still trade below their all-time highs, giving investors an opportunity to buy ahead of a potential industry-wide consumer boom.
1. CrowdStrike: 10% down from all-time high
More and more companies are relying on technologies such as cloud computing to run their sales channels, connect employees around the world, and handle day-to-day operations. This means hosting critical applications online and exposing them to cyberattacks 24 hours a day.
CrowdStrike’s Falcon platform provides comprehensive cloud security, data protection, and proactive threat hunting. But the company is a true expert in endpoint protection, perhaps the most important piece of the digital puzzle. Endpoints are devices and computers used by employees, and according to CrowdStrike, 90% of successful cyberattacks originate there.
Employees constantly interact with the outside world through email, phone calls, messages, and even online purchases. As such, these channels are prime targets for malicious attackers who use them as entry points to penetrate an organization’s broader network.
CrowdStrike combats these threats with the help of artificial intelligence (AI). We train our AI models on data from over 2 trillion cybersecurity events every day to eliminate breach attempts as accurately as possible.
You can’t expect the average employee within a company to become a cybersecurity expert. Using AI, CrowdStrike can automate threat detection and incident response so it works in the background without your knowledge.
As of its most recent third quarter of fiscal 2024 (ending October 31), CrowdStrike had annual recurring revenue (ARR) of $3.1 billion. This marked a 35% year-over-year increase, but is only a fraction of what the company estimates is a $100 billion opportunity in AI-powered cybersecurity alone. Of course, CrowdStrike’s opportunity could be significantly larger based on the spending gap identified by McKinsey & Company.
CrowdStrike stock soared 145% in 2023, but is still trading 10% below its all-time high after a steep decline in 2022. wall street journal We are tracking 45 analysts covering the stock, of which 36 have rated it a top buy rating and none recommended it as a sell. If there is such a consensus, it is very likely that CrowdStrike will trade above its all-time high in the new year.
2. SentinelOne: 65% down from all-time highs
SentinelOne is a much smaller cybersecurity company than CrowdStrike, but its AI-powered approach is just as determined. The company’s stock price has risen 81% in 2023, but is still down 65% from the all-time high it hit during the height of the tech frenzy in 2021. At the time, the company was trading at an unsustainable valuation, and its deep discounts are now unbeatable. A great buying opportunity for investors.
SentinelOne’s flagship Singularity platform is a complete solution for businesses of almost any size. Provides cloud security, identity protection, and endpoint protection. Automation is central to the company’s approach because it believes machines can act faster than humans when threats arise.
Singularity Cloud Workload Security features a host of AI-powered tools, including the Behavioral AI Engine. It is an active technology that works around the clock to build the storyline, so if a breach occurs, administrators can provide a report with context and diagrams to quickly pinpoint the source of the attack. can be tracked.
Singularity also offers unique features such as one-click rollback, so once a breach is neutralized, organizations can restore their digital assets to their pre-attack state and recover from the damage. But SentinelOne is taking its AI approach to the next level after the release of Purple AI, an AI-powered chatbot designed to speed up workflows and explore threats with just one prompt from cybersecurity administrators. I’m pulling up. Autonomous incident summaries can also reduce alert fatigue and save time from manual human investigations.
SentinelOne had annual recurring revenue of $664 million as of the end of its fiscal 2024 third quarter (ending October 31). This represents a 43% year-over-year increase, suggesting that while the company has less revenue than CrowdStrike, it is growing faster and gradually gaining market share.
But there’s another reason Sentinel One stock could soar next year. The price-to-sales ratio (P/S), which measures sales over the past 12 months relative to market capitalization, is just 13.4 times as of this writing. That means SentinelOne stock would need to rise 59% to trade in line with CrowdStrike’s P/S ratio of 21.4. SentinelOne has been growing revenue faster than his CrowdStrike, and typically taller than P/S ratio is not low.
So SentinelOne stock could be poised for a great year in 2024, based not only on increased cybersecurity spending, but also on its valuation.