Typically when somebody threatens to do something, especially if it is Russian President Vladimir Putin, then you can pretty much count on it happening. Even before the outbreak of war in Ukraine, there were numerous channel threats coming from Russia, according to reports, citing the potential for cyberattacks and hacking against the United States. Recently the U.S. Department of Homeland Security warned of the potential for attacks and noted that U.S. organizations at all levels could face cyber threats stemming from “the potential for the Russian government to consider escalating its destabilizing actions” beyond Ukraine.
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It just takes a moment for investors to remember the Russian cyber terror group DarkSide’s hack of the Colonial Pipeline in May of last year that effectively choked the transportation of oil to the eastern United States. Industry experts have warned in the past after such attacks that a prolonged shutdown of major U.S. pipelines could push gas prices higher and cause disruptions in eastern parts of the country. With oil and gasoline at the highest levels since 2008, a major shutdown now could spell disaster.

A new Goldman Sachs report notes that vigilance at every level (local, state and the federal) government to the top echelons of corporate America is now a massive priority to ensure cybersecurity. The report  said this:

Recent macro events provide incremental budget support. As expected, recent events have resulted in a step change of severity for an already elevated threat environment. We could see some pull-forward in budget spending due to urgency that enterprises have in this environment; however, as we saw with the impact of recent events such as Solarwinds, Colonial pipeline, JBS, and Log4Shell, we anticipate greater support for spending as threats receive more prominent attention from the media, the government, and C-Level executives. The most critical near-term priority for enterprises should be security posture hygiene.

The analysts think that six top companies will benefit from the increased spending across the industry. One of the companies, Mandiant Inc. (NASDAQ: MNDT) is being bought by Alphabet, the parent company of Google, for $23 a share, so here we focus on the other five. Since not all of them are rated Buy at Goldman Sachs, it is important to remember that no single analyst call should ever be used as a basis to buy or sell a stock.

CrowdStrike

The cybersecurity giant has pulled back recently after a huge run and is 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.
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Goldman Sachs has a Neutral rating and a price target of $236. The higher consensus target for CrowdStrike stock is $269.31. The most recent close at $156.77 was down over 6% for the day.

Palo Alto Networks

This continues to be one of the most dominant players in the 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, the company’s security platform safely enables business operations and delivers protection based on what matters most in today’s dynamic computing environments: applications, users and content.

The Palo Alto Networks security platform has features that were introduced that 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 company recently posted solid results, and Goldman Sachs noted this:

Another quarter of solid execution as the company remains a consolidator in its markets. Palo Alto Networks delivered another quarter of solid, clean results as it continues to consolidate market share while optimizing its platform. Product revenue in the fiscal second quarter of 2022 grew over 20% year-over-year, NGS annual recurring revenue grew 70% year over year and total billings grew 32% year-over-year.

The Goldman Sachs price target on Palo Alto Networks stock is up at $650, while the consensus target is $620.58. The shares ended Tuesday trading at $525.15.

Investors may not be familiar with this company, but its shares have solid upside potential to the Goldman Sachs target. Rapid7 Inc. (NASDAQ: RPD) engages in the provision of cybersecurity analytics and automation services. Its products include its Insight platform, which offers InsightVM, InsightIDR, InsightAppSec and InsightConnect.
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Rapid 7 is advancing security with visibility, analytics and automation delivered through its Insight cloud. Its solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks and automate routine tasks. Some 8,400 customers rely on Rapid7 technology, services and research to improve security outcomes and securely advance their organizations.

Analysts have noted that Rapid 7s’ portfolio of cloud security solutions helps address the need to improve infrastructure visibility, whether based on cloud-native development or traditional application architecture.

The $130 Goldman Sachs price target on the Buy-rated shares compares with the $131.25 consensus target. Rapid 7 stock closed on Tuesday at $103.41 a share.

SentinelOne

This is perhaps a lesser-known stock in the industry, but it offers a very attractive entry point. SentinelOne Inc. (NYSE: S) operates as a cybersecurity provider in the United States. Its Singularity Platform delivers artificial intelligence-powered autonomous threat prevention, detection and response capabilities across an organization’s endpoints and cloud workloads, enabling seamless and automatic protection against a spectrum of cyber threats.

Last month the company announced a new integrated solution with Mimecast to improve end-to-end threat protection, accelerate incident response and minimize delays for security teams. With SentinelOne and Mimecast, security teams can leverage cooperative defenses and rapidly respond to threats across email and endpoints for a holistic approach to incident response powered by XDR.

Goldman Sachs has set a Buy rating with a $79 target price. The consensus target for SentinelOne stock is $63.50, and Tuesday’s closing print of $33.29 was down nearly 5% for the day.

Tenable

This company may hold the best value for investors at current trading levels. Tenable Holdings (NASDAQ: TENB) provides cyber exposure solutions in the Americas, Europe, the Middle East and elsewhere. The company’s platforms include Tenable.io, a cloud-delivered software as a service, and Tenable.sc, an on-premises solution.
Tenable’s platforms provides organizations with a risk-based view of traditional and modern attack surfaces to deliver a complete and continuous view of assets, associated vulnerabilities, internal and regulatory compliance violations, misconfigurations and other cybersecurity issues, as well as prioritizes these issues for remediation based on risk assessment and predictive analytics and provides insightful remediation guidance.

The company also offers Tenable.ot, an on-premises solution that provides threat detection and mitigation, asset tracking, vulnerability management and configuration control capabilities to protect OT environments, including industrial networks. In addition, it provides Nessus Professional, a vulnerability assessment solution for identifying security vulnerabilities, configuration issues and malware. Its Nessus Essentials includes vulnerability and configuration assessment for a limited number of assets.
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The company posted very solid results early in February, and Goldman Sachs said this:

Tenable delivered its third quarter in a row of accelerating revenue and current billings growth. Revenue and CCB for the fourth quarter beat consensus estimates (FactSet) with initial guidance for both metrics over fiscal year 2022 consensus as well. In addition to strong execution, Log4J accelerated demand in the quarter, and we expect the vulnerability will remain a meaningful tailwind. The company saw strong customer growth along with healthy traction across its platform and expansion of asset coverage within its installed base to drive better net retention rates. Tenable added 562 new enterprise platform customers, a record add for a single quarter. Healthy large enterprise transactions led to 100 net new six-figure customers, up from 66 in the fourth quarter of 2020.

Tenable stock is Buy-rated at Goldman Sachs, and its $66 target price is in the ballpark with the $66.36 consensus target. Tuesday’s closing share price was $54.51.

While the whirlwind around the top stocks in the sector has changed dramatically over the years as the pace of massive cyberattacks has grown, the need for corporate America and government is increasing every year. With the added threat of multiple attacks from Russia on infrastructure and other vital areas, demand will increase out of sheer necessity. These top stocks offer investors solid ways to play the sector in a multitude of areas.

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