With private equity firms showing interest in the cybersecurity sector through acquisitions, now could be an opportune time to invest in cybersecurity stocks.
Despite experiencing dips during market downturns, these stocks have maintained a strong growth trajectory. As the market turns bullish again, these companies should benefit.
Investing in cybersecurity stocks is a logical choice given the high costs of malware-related attacks, especially for major enterprises.
That said, there are some companies that insiders appear to be looking to the exits on. Here are three stocks that may be excellent underlying companies, but have some insider selling activity that could indicate there may be some trouble underneath the surface.
Cloudflare (NET)
Consider Cloudflare (NYSE:NET), the world’s leading provider of diversified CDN services, as a safer investment for AI opportunities. TradeSmith’s AI algorithm predicts a potential 4.3% increase in a month, equivalent to a 68% annual rate of return.
With over 100 data centers and serving a significant portion of global websites, Cloudflare benefits from network effects and is trusted even by tech giants like Walmart (NYSE:WMT) and Dell Technologies (NYSE:DELL) for their e-commerce sites.
Cloudflare is an undervalued tech stock with significant potential in the content delivery networks sector. As a leading network provider, Cloudflare plays a crucial role in handling internet traffic and offers protection against cyber attacks.
With revenue growth of 50% over the past five years and forward estimates exceeding 36.4%, the company shows promising prospects.
After a drop in share prices following the first-quarter earnings report, savvy investors seized the opportunity to buy the dip, recognizing the potential of this sleeper stock at discounted prices.
Unfortunately, key insiders at the company have been disposing of signifiant blocks of shares in recent weeks. This is a stock that investors may want to monitor in terms of insider buying and selling activity.
Tenable (TENB)
Tenable (NASDAQ:TENB) is a rapidly expanding cybersecurity company with strong revenue growth in double digits. It provides versatile cyber exposure solutions across different sectors, including retail, energy, and finance.
With a majority of sales coming from subscriptions, Tenable maintains positive cash flows and has a strong cash position.
Despite high stock-based compensation, the company’s hyper-growth trajectory is expected to drive profitability. Analysts rate the stock as a moderate “Buy,” projecting a 15% upside potential.
That said, insiders have sold nearly 940,000 shares of TENB stock over the past month, signaling there’s bearish momentum building around this cybersecurity stock.
Despite strong recent growth, it appears the market is pricing in a less-favorable outlook moving froward. Thus, this is among the cybersecurity stocks I’m cautious on right now.
Okta (OKTA)
Okta (NASDAQ:OKTA) is poised to capitalize on the digital transformation and increasing demand for security solutions, despite recent market volatility, making it an attractive long-term investment.
Okta’s sales growth is projected to accelerate, with an expected 17.5% increase in FY2024 and a potential 21.2% growth by FY2026. Despite initial profit setbacks, Okta has steadily reduced losses from $277 million to $119 million in the latest reported quarter.
The recent market decline provides a unique chance to invest in a top-tier SaaS stock with great potential.
Okta, a leader in cloud access management, is an excellent choice for those looking to capitalize on the growing cybersecurity sector. Despite Q1 fiscal year 2024 results falling below forecasts, the company showed vigorous growth. Revenue increased by 25% year-over-year, average revenue per customer rose by 9%, and dollar-based net retention stood at a solid 117%.
Okta offers new products and beta-tested features like advanced phishing resistance and Okta Privileged Access. With expanding partnerships and integrations, Okta has a strong growth outlook. That said, like the other companies on this list, Okta has seen some insider selling activity that investors will want to watch.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.