Technology was a big 2020 winner, and it has started 2021 out the same way. Many of the top software stocks have had an outstanding year. One thing that continues to be critical for companies and governments is protecting data and keeping malicious hackers and malware from invading information technology systems and infrastructure.
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In a new research report, Jefferies remains very positive on the top cybersecurity stocks, and with good reason. The rate of serious security problems has increased, and top management at major U.S. companies will not remain for long if the ultimate effort for security and safety isn’t undertaken. The Jefferies report noted this:

We pointed out that the recent cyber breaches have been a significant catalyst for the security space, as our checks indicated that cyber remains a top priority for all businesses and continues to rise as a percentage of IT spending. A consistent theme was a layered approach, as customers use products in tandem, with multiple body guards in each security category whether it be endpoint, email security, vulnerability management etc. This defense strategy should keep multiple vendors doing well for the foreseeable future. We noted that 4 of our 6 cyber names have outperformed the I shares expanded Tech-Software ETF since the third quarter, raising the bar for expectations. That said, fundamentals remain favorable and we recommend a basket of Security names.

Five stocks are recommended, all rated Buy and all outstanding ideas for aggressive growth investors looking to add this hot technology silo. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

CrowdStrike

Shares of this cybersecurity giant have pulled back some recently after a stellar run and are offering an outstanding entry point. CrowdStrike Holdings Inc. (NASDAQ: CRWD) is a leader in the endpoint protection platform (EPP) market. EPP solutions help protect enterprises’ internet-connected devices from cyberattacks, and there is a market shift from signature-based on-premises solutions to cloud-based platforms that use machine learning.

CrowdStrike’s platform is one of the few 100% cloud-based architectures and is uniquely positioned to displace incumbents with its platform breadth, including advanced detection and remediation capabilities.

Many analysts feel that the company is well positioned for sustainable success in a market in which the share leaders have failed to innovate. Outside of core endpoint security, most expect CrowdStrike can continue to drive strong multi-module adoption, leading to increased stickiness and better long-term positioning.

Jefferies has a $275 price target on the shares, well above the Wall Street consensus target of $220.15. CrowdStrike stock closed at $222.36 on Monday.

This off-the-radar cybersecurity pick has big potential upside in a red-hot industry, and it could be a potential takeover target. Cloudflare Inc. (NYSE: NET) provides an integrated cloud-based security solution to secure a range of combinations of platforms, including public cloud, private cloud, on premise, software-as-a-service applications, and Internet of Things (IoT) devices.
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Cloudflare’s security products include Cloud Firewall, Bot Management, Distributed Denial of Service, Infrastructure Protection, IoT, SSL/TLS, Secure Origin Connection and Rate Limiting. The company also offers performance solutions, which include Content Delivery, Intelligent Routing, and Mobile Software Development Kit, as well as Content, Mobile, and Image Optimization.

In addition, the company provides Reliability solutions, comprising Load Balancing, Anycast Network, Virtual Backbone, DNS, DNS Resolver and Always Online. Further, the company provides solutions to protect an organization’s internal resources, such as devices, users, applications and data, comprising Zero Trust Security and Access Management, which secures, authenticates and monitors user access to internal applications and infrastructure hosted on-premise or in-cloud environments, as well as Secure Web Gateway to secure and filter outbound internet traffic to protect employees from threats on the public internet and to help protect internet-browsing employees from bringing malware or vulnerable code into an organization.

The Jefferies price target is $95, which is also well above the consensus target of $81.33. Note that Cloudflare stock popped 6.5% on Monday and closed at $91.13 a share.

Palo Alto Networks

This continues to be one of the most dominant players in its industry. Palo Alto Networks Inc. (NASDAQ: PANW) is helping to lead a new era in cybersecurity by protecting thousands of enterprise, government and service provider networks from cyber threats. Unlike fragmented legacy products, its security platform safely enables business operations and delivers protection based on what matters most in today’s dynamic computing environments: applications, users and content.

Palo Alto Networks security platform has new features that were introduced to help security professionals overcome the distractions and time spent on problems caused by the overwhelming volume of alerts and manual processes associated with operating many discrete security products and, instead, expand breach prevention capabilities and boost operational efficiency.

The $425 Jefferies price target compares with a $376.06 consensus price objective. Palo Alto Networks stock closed at $385.40 on Monday.

This off-the-radar stock has outstanding upside potential. Sailpoint Technologies Holdings Inc. (NASDAQ: SAIL) engages in the provision of enterprise identity governance solutions in the United States and throughout the world. It also offers licensing of software, sale of professional services, maintenance and technical support.
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Leveraging artificial intelligence and machine learning, SailPoint’s predictive identity governance platform delivers adaptive security and continuous compliance, while dramatically improving operational efficiency. With SailPoint, organizations of all sizes can embrace innovation, expand their workforce globally and evolve their business, securely and confidently.

Jefferies has set its price target at $70. The consensus target is $61.93, and the shares ended Monday’s trading at $59.09 apiece.

Varonis Systems

While not a pure-play security stock, this is a big potential winner in the overall sector. Varonis Systems Inc. (NASDAQ: VRNS) provides software products and services that allow enterprises to manage, analyze and secure enterprise data in North America and internationally. Its software enables enterprises to protect data stored on premises and in the cloud, including sensitive files and emails; confidential personal data belonging to customers, and patients and employees’ data; financial records; strategic and product plans; and other intellectual property.

The company offers DatAdvantage that captures, aggregates, normalizes and analyzes every data access event for users on Windows and UNIX/Linux servers, storage devices, email systems and intranet servers. Its DatAlert profiles users and their behaviors related to systems and data, detects and alerts on deviations to established baselines and provides a web-based dashboard and investigative interface. The company also provides a Data Classification Engine that identifies and tags data based on criteria set in various metadata dimensions and provides business and information technology (IT) personnel with actionable intelligence about data.

The Jefferies price target on Varonis Systems stock is $205. The consensus target is $168.94, but shares closed Monday at $183.18, after pulling back almost 4% on the day.

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Wall Street has returned to these companies in a big way as the need in corporate America and government is increasing every year. These top stocks offer investors solid ways to play the sector in a multitude of areas, and while only suitable for aggressive growth investors, they are among the best of the best.

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