Investors fearful of a bubble brewing in the AI sector, driven by circular financing, need to shift their worries elsewhere. The cybersecurity sector has several stocks trading at unsustainable valuations.
Palo Alto Networks (PANW) sells hardware-based cybersecurity solutions. The stock fell steadily from over $400 in late October to close below $315 last week. Still, PANW stock trades at a forward P/E of around 75 times.
Cloudflare (NET) trades at a premium, too. However, the firm hiked its outlook for the full year. It expects revenue to grow in the range of 15% to 25%. That is above the prior target of 10%. Customers are building agents on the Cloudflare platform.
Agentic AI continues to grow. Customers include Meta Platforms (META) and Alphabet’s (GOOG) Google. Cloudflare’s platform attracts many sectors. That includes content creators, publishers, financial services organizations, and e-commerce companies.
Zscaler (ZS) is a market leader in secure access service edge. However, analysts from DA Davidson wrote that competition and commoditization are headwinds for that space. The firm needs to grow its annual recurring revenue to negate that risk.
CrowdStrike Holdings (CRWD) trades at a premium, which might pull shares lower. On Nov. 3, the firm said it would buy Fiddler AI, an AI agent observability and explainability company. Secondly, it is buying Dreadnode, which makes automated security testing solutions.
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