Cybersecurity will be an essential part of the future of the digital economy. Businesses have a financial incentive to use the best security tools to protect their data and systems. Did you know that the average breach can cost a business nearly $4.5 million? This is what reveals an annual study carried out by IBM.
However, existing products like antivirus software often no longer do the job. This is where next-generation solutions come into play. Investors have a variety of cybersecurity stocks to choose from, but after due diligence, three emerged as potential long-term winners.
Here are the three cybersecurity stocks you can buy and hold over the next decade.
1. Palo Alto Networks
The firewall has been essential to security for years, and this is where Palo Alto Networks (NASDAQ:PANW) specializes. A firewall is like the security department at a party that checks the guest list to make sure only the invited people enter. Firewalls monitor incoming and outgoing network traffic, looking for anything out of place. Palo Alto Networks firewall security is top-notch; third party companies like Gartnerit’s prestigious Magic Quadrant rankings named it the leader in its category.
Today, Palo Alto Networks has more than 70,000 active customers and is growing by expanding its product offerings to include additional security categories on two additional platforms. This gives the company three platforms: network security, cloud security, and security operations. Currently, only half of the company’s customers use two of the three platforms, and only 13% use all three, so there are cross-selling opportunities.
Palo Alto is one of the largest security companies, with annual revenue of over $7.5 billion. Profits have exploded in recent years and analysts estimate that profits will continue to grow, reaching an annualized average of 22% over the next three to five years. The company’s large customer base and size give it a strong position in competing for its customers’ security budgets over the next decade.
2. CrowdStrike Holdings
Endpoint security is one of the focal points of next-generation solutions, and CrowdStrike Titles (NASDAQ:CRWD) is quickly proving to be a winner in this area. Endpoint security protects devices on a network (endpoints), such as computers or mobile devices. CrowdStrike uses artificial intelligence (AI) and a cloud-based platform to provide instant and effective protection against potential threats. The platform learns from the threats encountered, meaning the product improves as it grows and encounters more threats.
CrowdStrike makes it remarkably easy to cross-sell its products because it sells different products and services in modules. Customers can choose whatever they want according to their needs. CrowdStrike has released modules over time as it expands into new categories. Today, 27% of CrowdStrike customers use at least seven modules, and the number of those using at least eight has more than doubled since the end of 2023.
A combination of customer growth and cross-selling has fueled considerable growth; revenues grew from $400 million to $3 billion in just four years. The company has also grown to a size where earnings are starting to skyrocket, giving the stock a good outlook for long-term investors. Analysts estimate that CrowdStrike’s profits will grow an average of 22% annually over the next three to five years.
3.Microsoft
Tech giant Microsoft (NASDAQ:MSFT) isn’t the first name you think of when you talk about cybersecurity growth stocks. It also doesn’t grow as quickly as the others on this list. But what Microsoft offers is a much higher level because it is a very diversified company with leading companies in several industries. Microsoft Defender’s security product is integrated into Windows and Office software.
Looking to sleep well at night with your investments? Look no further. Palo Alto Networks and CrowdStrike are just drops in the ocean compared to what Microsoft generates each year. The company has a rock-solid balance sheet with an AAA rating, one of only two publicly traded companies to enjoy such status. It’s also the only company on this list that pays dividends, which Microsoft has collected for over 20 consecutive years.
Microsoft Defender will never be the focal point for shareholders, but that’s okay. The stock can offer investors exposure to cybersecurity with the added bonus of enterprise software, cloud, gaming and more. Despite its enormous size, Microsoft continues to grow. Analysts estimate the company will grow earnings 16% annually over the next three to five years, making Microsoft a jack-of-all-trades that investors can hold with confidence for the long term.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends CrowdStrike, Microsoft and Palo Alto Networks. The Motley Fool recommends Gartner and International Business Machines and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Cybersecurity Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool