Which stock will protect your portfolio? | #hacking | #cybersecurity | #infosec | #comptia | #pentest | #ransomware

According to the Allianz Risk Barometer, cybersecurity threats like ransomware attacks, data breaches, and IT disruptions are the biggest worry for companies globally in 2024. As investments in AI and other digital assets increase, cybersecurity becomes more important for both investors and businesses.

Macquarie US Head of AI & Software Research Fred Havemeyer joins Yahoo Finance for the latest installment of Good Buy or Goodbye, giving insight into which companies are best for investors to capitalize on the growing cybersecurity sector, and which ones to potentially avoid.

Havemeyer selects CrowdStrike Holdings (CRWD) as his Good Buy, with a price target of $285 per share. He cites the company as having the best security software that’s well known amongst many consumers in an increasingly hostile digital landscape — including more advanced cyberattacks from generative AI — which will, in turn, necessitate businesses to use their products and services, leading to growth.

Havemeyer points to Okta (OKTA) as a Goodbye, stating the company is rebuilding trust in the market after several issues and data breaches. Alongside Okta;s many delayed product releases, Havemayer questions the company’s guidance and whether it efficiently assessed risks when making its guidance.

Click here to watch more of Good Buy or Goodbye or you can watch this full episode of Yahoo Finance Live here.

Editor’s note: This article was written by Nicholas Jacobino

Video Transcript


JOSH LIPTON: It’s a big noisy universe of stocks out there. Welcome to Good Buy or Goodbye. Our goal to help cut through that noise navigate the best moves for your portfolio.

Macquarie predicts 2024 will be a highly hostile year for digital threats, which could be a tailwind for names in the cybersecurity sector. But which names are best positioned and what’s the best way to play it? Now, I’m here with Fred Havemeyer, Macquarie’s head of US AI and software research.

Fred, it is good to see you. Thank you for joining us. So I want to start, Fred, today– we’re going to start with your first pick here, which I think a lot of investors are going to know it is CrowdStrike. And let’s walk through some of the reasons here, Fred.

CrowdStrike you say is a buy. The price target $285. Your first reason here, Fred, is that you note that CrowdStrike is best-of-breed endpoint security platform. Kind of walk us through that.

FRED HAVEMEYER: Absolutely. Thank you very much for having me on. CrowdStrike, I think, many likely have been familiar with this name. It is the best-of-breed endpoint security product out there.

So when you need something to protect you on your laptops, on your workstations, on your devices, we think that CrowdStrike is the software that you’re going to go to. This is a company that excels at detecting and preventing both known and unknown threats. And in this year where we see just the threat landscape, as we referred to it and as you mentioned, becoming just exceptionally hostile, we think that you need that kind of best-of-breed protection that can manage everything, whether or not the threat has been seen before.

JOSH LIPTON: OK, let’s go to point number two, Fred. Let’s see the second reason you believe. You kind of mentioned this, but basically you’re looking across 2024, you see an increasingly hostile environment.


JOSH LIPTON: And this is one way– these are the guys who are going to step in and help CIOs protect the companies.

FRED HAVEMEYER: Oh, absolutely. And we see them actually leading this charge here throughout. And I think that when we look at this year in particular, like 2024– 2023 was already a hostile landscape.

But going into 2024, with this presidential election cycle, with the multiple different hot wars at this point as well too, in addition to the rise of generative AI making phishing attacks more sophisticated, we see the culmination of a number of things, including cartel-like activity among attackers, threat actors. That we think the landscape is set up such that you are, I think, having a very constructive cybersecurity demand environment. And we think it’s a really solid tailwind for CrowdStrike.

JOSH LIPTON: All right, last bullet here, Fred. Let’s see this last bullet. One is gen-AI-powered attacks.

FRED HAVEMEYER: Yes, so that one is something we’re watching very closely. We think that with the rise of generative AI, there’s abundant ways that this is going to benefit businesses. But also, we think it lowers the bar for how sophisticated attackers need to be to pull off complex attacks.

We think it also makes personalized phishing a much more pronounced risk. So we think CrowdStrike once again is well positioned to help mitigate against those attacks. And it is pure play, like machine learning in the backend, it is a machine learning company.

JOSH LIPTON: And Fred, you know, so you’re making a compelling case here. Viewers who are listening in right now, right, before they pile in and commit capital to this name, what are some risks they need to know about?

FRED HAVEMEYER: Absolutely. It’s always good to have a very healthy perspective on a company. And when we look at CrowdStrike, we tend to think that this is a company that while we love it still does have risk from either the company saturating in the enterprise marketplace.

Just hitting that threshold where it has substantial market share and it can’t– it would need to move down market, which could be more competitive and where you might see companies like Microsoft really going out there with products that in that case could be good enough. May not be nearly as good as CrowdStrike, but could be competitive. And we think that competition is where things get a little risky potentially.

JOSH LIPTON: All right, so that’s your buy, Fred. Let’s also look at one you’re not as enthusiastic about. That is Okta here. Now, we don’t want to overstate it, Fred, right? Because you’re not going to sell, you’re neutral.


JOSH LIPTON: So you’re basically a hold. Your price target is $80. But let’s walk through some of these names too of why, Fred, you don’t– you wouldn’t be rushing to buy this one. First bullet point here, still rebuilding trust. Talk us about that.

FRED HAVEMEYER: Well, Okta has had a number of significant and high-profile data breaches and data issues over the past several years now. And the company, as of this past quarter, said that what they’re doing is they’re focusing their time, and effort, and commitments, and R&D commitments towards bolstering their security practices to prevent any future breaches or any sort of security incidents in the future. So really this company is focusing on what it needs to do, which is rebuilding trust with customers. It takes time though and it brings risk.

JOSH LIPTON: Got it. Second bullet point, second reason you’re at a neutral here, delayed product releases.

FRED HAVEMEYER: Yep. So with this, as the company announced last quarter, they put all product releases except for Privileged Access Management on hiatus while they focus their R&D efforts on just security. So they’re delaying shipping most products and focusing on security.

That brings risks as well. They’re doing what they need to do in the right things on trying to rebuild that trust. But in doing so, they could be deferring future growth with delaying product shipments.

JOSH LIPTON: All right, third and final reason here, Fred, you would be on the sidelines when it comes to Okta, questioning guidance.

FRED HAVEMEYER: Oh, yeah. I think we at our core are questioning whether or not guidance was sufficiently de-risked for the trust that needs to be rebuilt, whether or not the company actually de-risked guidance sufficiently in the case that churn appears going into the back half of this year.

JOSH LIPTON: And final point here, so what would it take, Fred, for you to get more bullish on the name?

FRED HAVEMEYER: I think that if Okta did de-risk guidance sufficiently and if we see that churn is stable rather that the company doesn’t see significant churn while it rebuilds trust, then this is a reasonably-valued company. So we’re going to give it some time. We would avoid it for now. But if we see signs that it addressed its security commitments or issues and it is rebuilding that trust, there could be upside here.

JOSH LIPTON: All right, potential upside there. So let’s sum this up for you. So you’re telling investors, buy CrowdStrike based on its profitable growth and AI tools.

And on the other side, you’re saying avoid Okta. You’re on the sidelines there as the company is still rebuilding trust and holding back product releases. Thank you, Fred, so much for joining us today.

FRED HAVEMEYER: Thank you very much.

JOSH LIPTON: We appreciate it. And thank you for watching. Good Buy or Goodbye.


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