Double-Digit Gains Ahead? These 2 Cybersecurity Stocks Look Ready

Key Points

• Cybersecurity stocks are well-positioned for the digital world due to the increasing use of digital technology and cyber threats.
• Fortinet's differentiated services set it apart as a leader in network security in the world of AI. 
• Cloudflare's unified platform and easy-to-use interface resonate with clients who drive industry-leading growth. 

Fortinet NASDAQ: FTNT and Cloudflare NYSE: NET are two cybersecurity stocks poised for double-digit gains in 2025. They are poised for double-digit gains because of their differentiated positions in a rapidly growing market, utility to clients, 2024 results, 2025 guidance, cash flow, and analysts' sentiment.

Regarding the market, cybersecurity stocks are supported by the dual tailwinds of businesses' widening use of digital and increased exposure to cyber threats. 

Estimates vary, but generally agree that cyber attacks are thriving, with many categories up triple digits in 2024. Along with the increase in attacks is the increase in cost, time to mitigate, and lingering impact on operations. The bottom line is that businesses need digital technology to operate and compete in today’s world; it is central to efficiency and growth, and cybersecurity is part of the package. 

Fortinet and Cloudflare both serve businesses and organizations but in different ways. Fortinet’s forte is network security, including firewalls and endpoints, while Cloudflare is a cloud-based service focused on websites.

It helps improve performance and site speeds via numerous security features, including DDOS and DNS attack protection and hackers.

Both are user-friendly, unified platforms powered by proprietary technologies and may be integrated into a comprehensive security package for businesses and enterprises. 

2024 Was Good for Cybersecurity Business, Guidance for 2025 is the Same

Cloudflare and Fortinet had solid 2024s, capped off by strong performance in Q4. Each produced high-double-digit growth, with Fortinet accelerating to 17% and Cloudflare sustaining its high-20% pace. Business drivers include strength in services and product segments, significant growth in large clients, and deepening service penetration. Margin news is also good, with earnings growth accelerated and outperforming MarketBeat’s reported consensus figures despite increased share counts. 

Guidance for 2025 includes an expectation for growth to slow but sustain at high-double-digit paces. Margins are also expected to remain strong, driving robust cash flows. Cash flow margins hit record highs in 2024 and are central to the long-term stock price outlook. These companies are heavily reinvesting in product development and new technology today, but they are also improving cash flow and are on track for capital returns.  At the end of 2024, the balance sheet highlights include increased cash, securities, current, and total assets, which are only partially offset by increased liability. Equity is rising, turning positive in the case of Fortinet, and leverage is low. Fortinet is net cash, and Cloudflare is nearly so, but it is only expected to improve.

Cloudflare, Fortinet Analysts Lift Price Targets After Q4 Results 

Analysts were catalyzed by Cloudflare’s and Fortinet’s Q4 results, lifting their price targets in response. The consensus targets for these stocks lag their stock price action in mid-February but are up by double-digit amounts in the week since their reports, with the freshest targets leading to new highs. They put these stocks up another 35% to 45% in 2025. 

The price action is favorable. Both stocks are trending higher, although Cloudflare's market looks stronger. Its uptrend is accompanied by a convergent MACD, not a divergent one, indicating market strength and a higher probability the uptrend will continue. Cloudflare's chart also includes a conspicuous volume spike, making it the better choice for near-term oriented trades and investments. Fortinet's market has divergent momentum and may lag Fortinet in price performance.