Cybersecurity demand has picked up significantly over the last few years as the threat of cyber-attacks becomes ever more prevalent. As a result, demand for cybersecurity stocks has also increased.
Morgan Stanley analysts told investors in a note Wednesday this week that the firm has become more bullish on security "given rising threats, regulatory tailwinds, and more stable demand trends." Here are the four cyber stocks Morgan Stanley sees opportunities in:
Varonis Systems (NASDAQ: VRNS ): The analysts raised the firm's price target on VRNS to $26 from $24 in the note, based on higher FY27 revenue and FCF estimates compared to the firm's prior model. They said that with the company displaying a larger-than-anticipated SaaS attach rate on new deals in its first full quarter of its SaaS transition, there is an "increasing likelihood of the SaaS opportunity driving higher levels of growth over the next 5 years."
Even so, the firm maintained an Equal-weight rating on the stock as they wait for further confirmation of consistent execution and increasing SaaS adoption before turning more positive.
CrowdStrike Holdings Inc. (NASDAQ: CRWD ): Morgan Stanley said that recent checks on the cloud workload and endpoint security, threat intelligence, and cyberattack response services provider have resulted in the firm having greater confidence in forward estimates for CRWD due to its "stable demand and competitive positioning." The analysts raised the price target on the stock to $178 from $163 per share.
Okta, Inc. (NASDAQ: OKTA ): Shares of the identity and access management company are down more than 5% Wednesday, but Morgan Stanley said in its note earlier this week that it has greater confidence in upside to forward estimates for the company due to "stable demand/macro and competitive positioning." The OKTA price target was also lifted to $89 from $84 per share.
SentinelOne (NYSE: S ): Shares of SentinelOne are down over 7% at the time of writing. However, along with the other three stocks listed above, Morgan Stanley sees a catchup opportunity in the stock. The analysts noted that ransomware attacks are up over 50% YoY in the first half of 2023 to all-time highs, as hackers are starting to "create and mutate malware faster than ever before with new Gen AI tools." The increase in attacks should favor security vendors that have high competitive overlap with Microsoft (NASDAQ: MSFT ) such as OKTA, CRWD, S, said the analysts.
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