1 Cybersecurity Growth Stock Crushing the Market This Year
While the tech sector has collapsed in 2022, this stock has quietly soared to all-time highs.
As more of the economy shifts online, the threat landscape follows. Company leaders are now tasked with protecting highly valuable assets in cyberspace, which can be complex as risks in the digital realm can stem from anywhere in the world.
A malicious attack that results in a data breach can be the worst nightmare for most corporations, as it doesn't just hurt the bottom line, but also does significant reputational damage.
As geopolitical tensions continue to rise across Europe and Asia, cybersecurity risks have arguably never been higher. That's one reason leading cybersecurity stock Tenable (TENB -4.30%) has soared 13% year to date, crushing the Nasdaq 100 technology index, which has fallen by 15%. Here's why that outperformance could continue.
Image source: Getty Images.
Cybersecurity is a need, not a luxury
During 2021, consulting firm KPMG conducted a survey of 500 CEOs who manage some of the world's largest companies. The survey sought to understand what those CEOs perceived as the greatest threats to their organizations, and at the very top of the list was cybersecurity risk.
In fact, by the end of the current decade, companies around the world could be spending over $478 billion annually on cybersecurity, according to some estimates. Among the greatest tools they can invest in are threat detection and vulnerability management, which proactively seek risks to prevent attacks before they do irreversible damage.
Tenable is the industry leader in that area. Its Nessus platform is the most deployed vulnerability management tool on the market, used by 30,000 organizations with over 2 million individual downloads. Its customizable nature makes it a great fit for businesses of any size, and its top-ranking coverage neutralizes more vulnerabilities and exposures than any other platform.
Tenable has spun Nessus' capabilities into a range of highly specialized cybersecurity tools that protect sectors like automotive manufacturing, finance, and even the U.S. federal government. Beyond vulnerability management, Tenable serves these customers with a diverse suite of tools, including cloud security, ransomware, and zero trust.
Growth led by large customers
Tenable's annual revenue crossed the half-billion-dollar mark for the first time in 2021, capping an incredible run of growth over the last few years in particular. It's being driven by the company's highest-spending customers -- those with an annual contract value of greater than $100,000 per year.
Data source: Tenable. CAGR = Compound annual growth rate.
It highlights the rapidly growing demand for advanced cybersecurity tools among large, more complex organizations. And over time, this trend should only accelerate as the threat landscape broadens. On that note, analysts expect sales growth to continue in 2022, topping $667 million for the full year.
Tenable is also profitable on an adjusted basis, growing its non-GAAP earnings per share by 78% in 2021 to $0.34, compared to $0.19 EPS in 2020.
Tenable stock's outperformance could continue
Wall Street analysts don't always get things right, but they've been incredibly bullish on Tenable stock. So far, they've nailed that call.
Eighteen analysts cover Tenable, and not a single one recommends selling the stock. In fact, 17 have a buy rating, with one maintaining an overweight rating -- a consensus like that is extremely positive for Tenable's prospects. The high-price target on Wall Street is $75 a share, which only represents 25% upside from where Tenable trades today, but the key is how the stock performs relative to the broader market.
If it does rise 25% while the Nasdaq falls another 15% (for example), that would be a significant outperformance of 40%. In this case, owning it would have been a great move, as it has been for the whole of 2022 so far.
With a growing addressable market and large organizations flocking to the company's cybersecurity tools, Tenable might be a no-brainer while the stock market is on shaky ground. But more importantly, it should do extremely well over the long run.