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Investing.com -- Berenberg started coverage on US cybersecurity companies, saying the sector’s long run of steady growth, high revenue visibility and expanding role in corporate IT budgets continues to support premium valuations.
Berenberg issued Buy ratings on Okta, Rubrik, SailPoint, SentinelOne and Zscaler. It set Hold ratings on CrowdStrike, Qualys and Rapid7.
Cybersecurity demand is tied to structural shifts such as cloud adoption, rising data volumes and more connected devices, as well as a threat landscape fuelled by geopolitical risk and AI driven attacks.
The brokerage said investors have focused heavily on large platform players that can consolidate vendor spending.
The top five cybersecurity stocks have outperformed the bottom five by 90 percent this year. Berenberg expects this divide to remain, but said integrated offerings do not automatically mean customers will move to single vendor stacks, especially in complex enterprise environments.
The analysts said margins should keep expanding as companies scale. Average operating margins in their coverage have moved from negative in 2021 to more than 15 percent this year, with room to reach the mid thirties over time.
The analysts named Okta, Rubrik, SailPoint and SentinelOne as top picks. It said the market is mispricing Okta and SentinelOne given their expected revenue growth and margin paths.
SailPoint is benefiting from a switch to SaaS that lengthens its recurring revenue profile. Rubrik is seen as a clean way to gain exposure to data growth and AI driven demand.
Okta was assigned a target price of 145 dollars, or 74 percent upside.
Rubrik received a target of 114 dollars, or 59 percent upside.
SailPoint was set at 31.7 dollars and SentinelOne at 25 dollars.
Zscaler, which Berenberg called one of the most consistent executors in the group, was given a target of 400 dollars.
Berenberg said cybersecurity has grown at roughly 21% a year since 2020 and should maintain mid teen growth as companies expand zero trust, data security and cloud workloads.