Robert Zach, Marco Oehrl

Investing.com. Cybersecurity is becoming more essential with the digitalization of work. It is long past the time when industrial espionage could be done with microfilm or small cameras. USB sticks, Wi Fi and Bluetooth interfaces as well as internet access are the new enemy. It is a danger to end users but it also presents huge opportunities for companies that solve this problem, which could provide meaningful market returns.

The ETFMG Prime Cyber Security ETF, (HACK), which includes industry giants like Cisco (NASDAQ:), Palo Alto (NYSE:), and Cloudflare(NYSE:), gained just 2.5 percent in 2021. However, its return for 2020 was an impressive 38 percent. Isn’t that often true in stock markets? Especially in areas like cybersecurity, when bad periods are quickly followed by positive ones.

A closer look

It is unlikely that anyone has ever had to deal with Trojans or viruses on a computer they own. Those who say they haven’t had a virus probably just didn’t notice its effects.

Cybersecurity is becoming an increasingly important commodity in a world where almost all devices can connect to the internet.

In 2020, this industry generated revenue of $118 billion around the world. Software accounted for 20%, hardware 35%, and IT services 45%.

Industry analysts expect that by 2026 sales will rise to $210 Billion, which is 10.6 percent annual compound growth rate.

Software and cybersecurity: What is its role?

U.S. was in 2020 the leading spender in the software sector. The U.S. was responsible for 56 percent of the global $41 billion in software security investments. That equates to $122 per employee for a total spend of $41 billion on software security.

Cybersecurity Software Report 2021

https://de.statista.com/statistik/studie/id/104227/dokument/software-report/

Europe accounted for just 25%, and Asia was far behind at 16 percent.

A CAGR of 7.0% is anticipated for this segment in the 2020-2026 period.

Software solutions seem to have a lesser role than the 10.6 percent CAGR for the whole cybersecurity industry.

But, it does not automatically mean that investing in software is futile.

The CAGR from 2016-2026 in Europe is 8.1% and 7.8% in the U.S. However, there seems to be a race for Asia to catch up with 10.4 percent.

If you examine total cybersecurity spending, it becomes clearer that Asia is showing a positive trend. The total cybersecurity spending is forecast to grow from $28.1 to $56.3 billion by 2026. It is an average increase of 100 percent.

It is particularly remarkable that the software revenue for Asia in this period will increase only 55.7 percent, from $7.0 to $10.9 trillion. These numbers show that IT services and hardware are being disproportionately benefited.

It is evident that software will be a smaller part of the Asian cybersecurity market in 2021-2026, with a projected decline in share from 24.9 percent to 19.4 per cent.

Even though the U.S. is unable to keep pace with Asia’s cybersecurity market growth, Europe and the EU are expected to see sales increase by 34.3 percent and 37.2 respectively.

Who is the cybersecurity expert?

Although the hardware market represents only 20% of overall cybersecurity market share, it is expected to grow at a 9.2 percent CAGR between 2020-2026.

This area is seeing a shift in market share. On the $23 trillion in global sales, Asia accounted for 47 %, Europe 28 %, and Europe 21 %.

The U.S. hardware market is forecast to shrink by just 36.4 percent and 32.7 percentage, respectively, but Asia will see a rise of $7.7 to $15.2 billion or 97.4 per cent. It is clear that Asia might be the cybersecurity market with highest growth rates.

https://de.statista.com/statistik/studie/id/104221/dokument/hardware-report/

China is the undisputed leader in hardware growth. From 2020-2026, spending in China is projected to rise by 162.6%.

The IT sector is experiencing the greatest growth

In cybersecurity, the largest part of sales is IT services. Expert personnel is also a key component of cybersecurity.

It is the area with the highest growth potential worldwide. Market sales are expected to reach $108 Billion by 2026 from $54 Billion in 2020. That’s a 12.2% compound annual growth rate.

https://de.statista.com/statistik/studie/id/104222/dokument/it-services-report/

The European IT services market is expected to grow from $19.7 to $32.2 billion (63.5%) in 2021-2026. In the United States, it will rise from $25.3 billion up to $40.7 billion (60.9%).

Asia may outperform the rest of the globe in cybersecurity IT services. The revenue is expected to rise from $13.4 billion up to $30.2 billion over the same time period. This represents a 125.4 percent growth.

Overall, we can say that Asia is the likely next growth market for the cybersecurity industry. It is important to not overlook the strong growth rates seen in Europe and USA.

Let’s now take a look the 15 cybersecurity stocks Wall Street analysts consider to have the most upside potential in the coming twelve months.

Investing.com: Our stock screenerWe filter stocks in cybersecurity to find those that are being followed closely by five analysts. They also need at least five buy recommendations. This will help us identify the best potential upside. Stocks with at least $2B in market capital were considered. Here’s our list:

• Varonis Systems (NASDAQ:) Average price target for 12M is $74.68/+55.40%)

• Cloudflare Inc (NYSE:) Average target price for 12M: $207.28/+51.26

• Splunk(NASDAQ:) Average target price for 12M: $167.29/+47.72%)

• Crowdstrike Holdings Inc (NASDAQ)

• Sailpoint Technologies Holdings Inc(NYSE:) Average target price for 12M: $68.53/+43.44

• SentinelOne Inc(NYSE:) Average target price for 12M: $68.14/+34.09%)

• CyberArk Software(NASDAQ:) Average target price for 12M is $218.86/+33.03

• Leidos Holdings (NYSE)

• Okta(NASDAQ)

• Zscaler(NASDAQ)

• Rapid7(NASDAQ:) Average target price for 12M: $145.13/+24.26%)

• Tenable Holdings(NASDAQ)

• SAIC(NYSE:) Average target price for 12M: $100.50/+20.14

• CACI International Inc (NYSE)

• Booz AllenHamilton (NYSE: Hamilton) (average target price for 12M: $97/+16.5%)

Please note: All figures are based on the closing price as of December 15, 2021.

The following are the top three names to look out for:

Varonis Systems shares offer the best potential

Wall Street analysts believe Varonis Systems is the cybersecurity specialist with the highest share price potential over the next 12 months. Here are 20 of the top analysts surveyedInvesting.com has estimated Varonis Systems’s price potential to be 55.4 percent. There are 16 buy recommendations, and 4 hold recommendations. No sell recommendations are available.

The company reported its third quarter results. revenueThe number of subscriptions increased by 31 percent over the past year to 100.4 millions. Subscription revenue increased 59 percent, to $70million. Non-GAAP profit increased from $3.1 Million in the previous quarter to $8.1 million.

Matthew Hedberg, RBC Capital Markets Analyst believes Varonis’s product in data governance and insider threats management could convert to a subscription model. This could increase the subscription revenue. Expert Hedberg is hopeful that the company will be able to support both cloud-based and on-premise data stores. Varonis saw an ARR increase of 36% in the third quarter. Hedberg views Varonis as a cybersecurity specialist who is poised for growth in 2022, particularly given the high demand and long-term growth drivers such as digitization and cloud migration.

RBC rates Varonis stock as “outperform”, with a $82 price target

Varonis is the new year’s mascot. expectsRevenue to rise 31-32 percentage points between $383.5 and $386.5 Million. Non-GAAP earnings are estimated to range between $19.5 and $21.5 millions.

Cloudflare shares have a return of over 50 percent

Cloudflare is the next stock to be added. The stock has already seen a rise of more than 73 per cent in 2021. At one point it was even higher at $221.64. But, due to JP Morgan’s concerns about the Fed’s tightening cycle and valuation, has come under considerable pressure and currently is trading at $131.87.

JP Morgan is convinced that Cloudflare may become one of its largest revenue generators within the next 10-15 years. The company has been positioning itself as “fourth cloud”, after Amazon, Microsoft, and Google, CNBC reported. JP Morgan dropped its “sell” rating from “hold” to Cloudflare because it is “the most expensive” stock covered by the company and other software companies in decline.

However, the Wall Street analysts assume that this correction represents a buying opportunity. Analysts assume that a price targetThe upside potential for the next twelve-months is just 51.26 Percent, which is $207.28

AccordingRBC Capital Markets says Cloudflare’s global addressable market may reach $100 billion by 2024. The market will grow even more with the introduction of 5G mobile network and the Internet of Things. RBC rates Cloudflare stock with an “Outperform” rating and a target price of $220

Cloudflare reportedThe third quarter revenue was $172.3million, an increase of 51 percent over the previous year. The cybersecurity expert posted a non-GAAP profit of $1.4million, which is the first in company history. We had an historic third quarter with revenue growth of 51% and large customer growth of 71%, respectively. Cloudflare’s CEO Matthew Prince spoke in an interview. He said that strong growth and efficient operations helped us reach profitability. press release.

Cloudflare anticipates that revenue will range from $184 to $185 million for the fourth quarter.

Cloud transformation could be a huge benefit to slunk stock

Another stock is Splunk. Splunk is another stock on the list. The company provides operational intelligence software, which analyzes and reports real-time data from computers. It has been a difficult year. For example, the stock price of cybersecurity firm has fallen more than 35% since January. The challenges of cloud transformation and the upcoming election are just two examples. surprise resignationSplunk stock has been under pressure from Doug Merritt, CEO.

The former highflier should not be dismissed completely. Especially since the company launched of Splunk Observability CloudIt faces fierce competition from other companies, such as Elastic Dynatrace (NYSE)

Total for the fiscal third quarter 2022 (the three month period ending on October 31, 2021) was $1,04,502. revenue rose19% increase in revenue year-over year, to $665 millions The cloud revenue grew 68 per cent to $243million in that same period. Many of our customers have just switched from the on-premise model to Splunk’s cloud software delivery.

According to an article by The Motley Fool, “With just a little over a third its revenue coming through the cloud,”

The 39 average price target is analysts surveyedThe current price at Investing.com was $167.29. This is nearly 48 percent higher than the actual value. Thirty-three recommend that you buy the stock. 16 others suggest that you hold it. It’s remarkable, in particular, that no one has recommended selling the stock despite recent volatility.

Splunk is a great bargain if you’re patient and have the nerve to do it.

There are other optionsAnalysts also see other companies that have greater potential for upside in cybersecurity over the 12-month span as Akamai (NASDAQ) (+16.31%), NortonLifeLock(NASDAQ:] (+16.06%), Palo Alto Networks, (NASDAQ) (+14.34%), and Fortinet (NASDAQ:) (+10.37%).

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