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Cloud Solutions Play - BUY the Dip!
Market Summary:
The major indices are mixed at midday following another very active and volatile morning session on Wall Street. The wild swings in Treasury yields remained at the center of attention with the tech sector and the Nasdaq struggling to stay in the green in the face of the rally in rates. The fact that the major cryptocurrencies hit multi-month lows overnight put extra pressure on the tech sector and despite the relative strength of cyclicals, the large-cap benchmarks are on track to close the first week of the year in the red.
Stock Pick Summary:
As Treasury yields continued to surge higher in the wake of the Fed’s hawkish release, growth and tech stocks have been under the pump. While the market pullback can be intimidating for even the seasoned investors, this is a great time to capitalize on the negative sentiment for long term success.
Today, we double down on a prolific cybersecurity vendor that specializes in endpoint protection, threat intelligence and hunting, attack remediation, and offers various solutions to supplement security and network operations teams. Several of the demand drivers that positively impacted cybersecurity spending in 2021 could continue into this year. Security prioritization and spending for increased cybersecurity demand is likely to sustain. We believe it is well positioned to sustain its robust revenue growth and capitalize on a growing opportunity within XDR (Extended detection and response), and can build a comprehensive Zero Trust platform that covers endpoint, data, and identity security
Its cloud-based architecture collects data across all its endpoint agents, analyzes the information within its cloud platform, and updates all of its customers' security posture. It sells packaged tiers of cybersecurity protection and offers individual security modules via its online marketplace. It connects all of its customers to an artificial intelligence-powered network. When a threat emerges, the network collectively defends against the threat and learns from it. The business is rapidly attracting customers -- it had more than 13,000 of them as of its most recent quarter, including 63 of the Fortune 100 and almost half of the Fortune 500. It is expected to hit $1.36 billion in its 2022 fiscal year, which would represent a 56% increase year over year. The cybersecurity market will keep growing over the next few decades. A research estimates that the cybersecurity market could grow from $218 billion this year to $345 billion years by 2026, so it is poised to benefit as a leading competitor in the space. With its annual recurring revenue rising 70% in Q2, it is clearly gaining share in its core endpoint security target market at a rapid pace and gaining traction with new products across multiple categories. We believe the high valuation is justified and are ready to grab some more shares today.
Risk Meter:
Allocation Guidelines:
We don't recommend over investing in any stock. Consider starting with a small amount, say 2-3% of your portfolio's overall value, and add a little at a time.
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