Cybersecurity Stocks Surge as $32B Deal Reshapes the Industry

Key Points

• A recent buy from Google in the cybersecurity space has sparked a new wave of attention to other stocks in the industry, potentially indicating that they are undervalued today.
• It seems that institutional capital has been ahead of the trend, as buying activity can be spotted in the past quarter.
• Wall Street analysts see this same theme at play, where undervalued gems may start to shine again.

A key indicator many investors overlook is the appetite for buying or selling among leading companies. One way to gauge this is by tracking IPO activity and major corporate acquisitions. Typically, IPOs signal market risk appetite, often indicating peak valuations.

Conversely, buying up stakes in other companies or outright mergers and acquisitions activity could signal that valuations might be nearing a bottom. Today, one such signal could be taken by the announcement that Alphabet Inc. NASDAQ: GOOGL has decided to acquire an up-and-coming cybersecurity firm in the technology sector, Wiz, in a massive $32 billion transaction.

While there isn’t much investors can do through Google stock, the signal could be taken that cybersecurity valuations might now be at an attractive level. This is where other names in cybersecurity could make an interesting addition to portfolios today; stocks like CrowdStrike NASDAQ: CRWD, Oracle Co. NYSE: ORCL, and even Palo Alto Networks Inc. NASDAQ: PANW make the list of potential winners today for reasons that will become clear shortly.

CrowdStrike Stock: A Top Pick for Analysts and Institutions

A couple of factors could reiterate the theme of cybersecurity stocks' valuations being at a potentially lower range today, one of them being the 15.6% boost in CrowdStrike holdings from institutional allocators at UBS Asset Management.

After this new allocation, the group now holds up to $621.3 million worth of the stock to give investors a bullish indication of attractive valuations today. More than that, Wall Street analysts reacted to these themes during the Google acquisition announcement.

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As of the day of the announcement, Morgan Stanley decided to initiate coverage on the stock with an Overweight rating. While no valuation has been assigned from them yet, investors can also look to the $425 price target set by UBS analysts as of early March 2025.

This view would imply that CrowdStrike stock will not only flirt again with its 52-week high of $455 per share but also has the chance to rally by as much as 13% from where it trades today, connecting the dots with the underlying story that some of these cybersecurity names might be on the lower end of valuation ranges.

Short Sellers Call It a Day for Oracle Stock

Over the past month alone, Oracle has reported a net 10.1% decline in its short interest level, a clear sign of bearish capitulation in this new rotation into cybersecurity stocks. Considering that this stock also trades at only 77% of its 52-week high, it becomes clear that the risk-to-reward ratio might benefit some buyers today.

That belief has been crystalized and taken advantage of by some institutional buyers recently. Those from Mackenzie Financial decided to boost their Oracle stock holdings by as much as 13.1% as of February 2025, frontrunning the widespread view of cybersecurity being cheap in today’s market.

After that new addition, Mackenzie now holds up to $480.4 million worth of Oracle stock today, a sign of confidence for retail investors to lean on. There is one more gauge, however, that investors should pay attention to today in order to get their potential buys on the right side of the equation.

Valuation metrics are usually how the market expresses its view of a stock or an industry. Today, Oracle trades at a massive premium to its peers with its 45.5x price-to-book (P/B) ratio compared to the computer sector’s 6.2x average valuation. There’s always a reason for markets to overpay, and these institutions seem to know it already.

Momentum and Upside in Palo Alto Stock

Now that shares of Palo Alto Networks trade up to 90% of their 52-week highs, investors can safely assume that bullish momentum is present in this name today, but that doesn’t mean that the ceiling has been reached.

As of February 2025, analysts from Susquehanna gave Palo Alto stock a Positive rating, with a $230 per share valuation on it.

This valuation would call for a new 52-week high in the stock, not to mention an additional double-digit upside from today’s level.

Like the other names on this list, investors can spot recent institutional buying in Palo Alto stock to support its upside story.

Again, UBS Asset Management made their views clear by boosting their Palo Alto stock holdings by as much as 92.7% as of February 2025.

After this addition, the reported net position has reached a high of $1.1 billion today, one of the largest bets today on this cybersecurity name moving higher.