Here are my top cybersecurity stocks. (and it’s not even close)

As artificial intelligence (AI) continues to capture the attention of investors, there is another large-scale trend they should be aware of. It’s cybersecurity. Malicious actors have more tools than ever before, and the amount of digital information they have access to is increasing. This is not a trend that is going away. Businesses must ensure the highest level of security. Otherwise, you risk becoming the target of a cyberattack that could cost you millions of dollars and erode trust in your company.

Due to this new reality, the cybersecurity industry is experiencing a tremendous boom. But with so many cybersecurity companies to choose from, it can be easy to get lost. One company is my clear choice and has the potential to become an even bigger force in the industry.

CrowdStrike has become a top choice in cybersecurity.

Crowd Strike (CRWD 2.66%) It’s my favorite product in the cybersecurity space for many reasons. First, it is a lightweight cloud-based program. This means you can deploy it quickly and easily to any endpoint in your business network and it doesn’t take up a lot of bandwidth. CrowdStrike has also integrated AI into its product lineup since launch.

Unlike some companies that use AI as a buzzword, CrowdStrike’s platform is built on AI. The main product of the Falcon platform is endpoint protection. This protects network access points, such as laptops and mobile phones, from external threats, and CrowdStrike leverages AI to analyze activity to determine whether it is normal or a threat. If a threat is detected, access to company servers can be terminated without human intervention.

We also have Charlotte AI, a generative AI product. This allows users to automate workflows, accelerate investigation times, and reduce the amount of skills required to become a cybersecurity expert. According to customer surveys, Charlotte has helped save approximately two hours per day through increased efficiency.

CrowdStrike has a large product line that has been growing slowly over the past few years. Rather than bundling together cybersecurity solutions from multiple vendors, CrowdStrike strives to be a one-stop shop for all your cybersecurity needs. CrowdStrike covers a variety of areas with products including endpoint protection, cloud security, identity protection, and threat intelligence.

This strategy worked for CrowdStrike. This is because 64% of customers use at least 5 modules and 27% use at least 7 modules. This shows ample room for product expansion in the client base, providing two growth opportunities for CrowdStrike by upselling existing customers and signing new customers.

CrowdStrike’s stock price has become expensive

Speaking of growth, CrowdStrike has been showing excellent growth for some time. In the fourth quarter of fiscal 2024 (ended January 31), annual recurring revenue (ARR) increased 34% year-over-year to $3.44 billion. CrowdStrike expects revenue to grow 30% to nearly $4 billion in fiscal 2025. Even though CrowdStrike is growing in size, its growth is showing little sign of slowing. This is a testament to the needs of the cybersecurity industry and CrowdStrike’s capabilities. Wall Street analysts believe it can grow revenue at a 27% pace to more than $5 billion in fiscal 2026.

CrowdStrike is also generating more and more revenue each quarter.

CRWD Profit Margin (Quarterly) Data from YCharts

So you have a company that is an industry leader in a rapidly expanding field and has strong financials. It seems like a no-brainer purchase, right?

Investors should also consider the stock’s price tag. It’s no secret that CrowdStrike is a great company and its stock is priced accordingly.

CRWD PS Ratio Data from YCharts

The biggest drawback of CrowdStrike stock is that the price of 28 times sales is very expensive. We are using the price-to-sales (P/S) ratio because CrowdStrike has not yet reached peak profitability. To translate this into a more familiar price-to-earnings (P/E) ratio, let’s give CrowdStrike an artificial 30% profit margin. This is a great goal for a software company like CrowdStrike.

With that profit margin, CrowdStrike would have a P/E of 93 at current prices. Using analysts’ fiscal 2026 revenue forecasts of $5.03 billion, CrowdStrike would trade at 56 times earnings.

That’s too expensive for many investors’ tastes, and we don’t blame them for not buying at today’s prices. However, once the stock price falls to more reasonable levels, I’d like to keep an eye on CrowdStrike because it’s too good a company to forget.