On July 19, a global technology outage caused by an update from cybersecurity firm CrowdStrike (NASDAQ: CRWD) resulted in significant disruptions worldwide.
The malfunction in CrowdStrike’s Falcon Sensor software led to grounded flights, disrupted health services, crashed payment systems, and blocked access to Microsoft (NASDAQ: MSFT) services, marking one of the largest IT failures in history.
As a result, CrowdStrike’s shares plummeted 12% in afternoon trading, while those of its competitors saw gains. This downturn came despite CrowdStrike’s impressive 100% rise over the past year, raising concerns among analysts over its valuation, with the company valued at $83.5 billion as of Thursday’s close.
Picks for you
Compounding the chaos, another outage also hit Microsoft’s Azure cloud services and caused an additional set of failures.
In this context, Finbold analyzed the ongoing trends and tracked down the two best stocks with strong buy ratings in July to watch for in the upcoming months.
Palo Alto Networks Inc. (NASDAQ: PANW) stock
Palo Alto Networks Inc. (NASDAQ: PANW), a leader in the cybersecurity space, offers a compelling investment opportunity due to its robust financial performance and operational efficiency.
With a market cap of $107.14 billion and an enterprise value of $105.21 billion, Palo Alto Networks has demonstrated consistent growth and resilience. The company has delivered steady revenue growth, with analysts forecasting a 20% growth rate moving forward. Palo Alto Networks’ bottom line is growing rapidly and has recently become profitable on a GAAP basis.
Return on invested capital (ROIC) further underscores the company’s efficient use of financial resources. Palo Alto Networks’ valuation metrics, including a forward P/E ratio of 57.89 and a price-to-cash-flow ratio of 45, are supported by its strong profitability and growth potential.
The PEG ratio, at 1.12, reflects the company’s ability to maintain high profit margins while expanding its customer base.
Analysts are optimistic about Palo Alto Networks’ future, with an average 12-month price target of $342.40, representing a 3.48% increase from its current price of $330.89. The high forecast is $385.00, and the low forecast is $275.00.
Palo Alto Networks’ broad portfolio of solutions, including network security, cloud security, and security operations, also provides a significant competitive edge.
Zscaler (NASDAQ: ZS) stock
Zscaler (NASDAQ: ZS), another leading cybersecurity firm, focuses on enhancing digital transformation through its Zero Trust Exchange platform.
The company has shown impressive financial performance and growth potential, driven by increasing demand for its innovative platform. In fiscal Q3 2024, Zscaler reported a 32.1% year-over-year increase in quarterly revenue, reaching $553.2 million.
This growth was fueled by rising customer demand for its Zero Trust Exchange platform. Adjusted EPS for the quarter was $0.88, an 83.3% annual improvement, significantly exceeding projections.
Free cash flow surged to $123.1 million, with a free cash flow margin of 22%. As of April 30, Zscaler’s cash reserves totaled approximately $2.2 billion, highlighting its strong financial health and liquidity.
Zscaler’s valuation metrics, including a forward P/E ratio of 64.02, reflect a premium valuation justified by the company’s robust growth prospects.
Analysts have set an average 12-month price target of $232.04, representing a 23.07% increase from its current price of $188.54. The high forecast is $290, and the low forecast is $180.
Zscaler’s Zero Trust Exchange platform, the world’s most prominent cloud security solution, protects thousands of customers from cyber threats and data loss. The company’s focus on innovation and expansion to meet growing demand positions it well for continued success.
Conclusion
Both Palo Alto Networks and Zscaler are well-positioned to benefit from the increasing demand for cybersecurity solutions, making them attractive alternatives to CrowdStrike.
These two companies take a unique approach to the ongoing cybersecurity revolution, making their stocks appealing choices among investors and giving them a clear-cut advantage over competitors.
However, investors should remain cautious and conduct thorough due diligence, considering the potential for market volatility and the ever-evolving landscape of cybersecurity threats.
Diversification and careful analysis of market conditions are essential in making informed investment decisions.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
