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According to the Allianz Risk Barometer, cybersecurity threats such as ransomware attacks, data breaches, and IT disruptions will be a top concern for businesses around the world in 2024. As investment in AI and other digital assets increases, cybersecurity becomes increasingly important for both investors and businesses.
Macquarie US Head of AI and Software Research Fred Havemeyer joins Yahoo Finance; good shopping or goodbye, We provide insight into which companies are best suited for investors to take advantage of the growing cybersecurity space, and which companies to avoid.
Mr. Havemeyer selects CrowdStrike Holdings (CRWD) as his company bargain, The target price is $285 per share. He cited the company as having the best security software that is well-known among many consumers in an increasingly hostile digital environment, including more advanced cyber-attacks with generative AI. As a result, companies will need to use their products and services, which will lead to growth, he said.
Havemeyer points to Okta (OKTA): Goodbye, The company said it is rebuilding trust in the market after several issues and data breaches. In addition to Okta’s many product release delays, Havemayer questions the company’s guidance and whether it effectively evaluated risks in developing the guidance.
Click here for more Good Buy or Goodbye or watch the full episode of Yahoo Finance Live here.
Editor’s note: This article was written by Nicholas Jacobino
video transcript
[MUSIC PLAYING]
Josh Lipton: It’s a big noisy world of stocks out there. Welcome to Good Buy or Goodbye. Our goal is to cut through that noise and help you navigate the best moves for your portfolio.
Macquarie predicts 2024 will be a very tough year for digital threats, which could be a boost for big names in the cybersecurity space. But which name fits best and what’s the best way to play it? Well, I’m here with Fred Havemeyer, head of US AI and software research at Macquarie .
Fred, nice to meet you. Thank you for your participation. So let’s start, Fred, with the first stock today. I think a lot of investors know it’s CrowdStrike. Here are some reasons why, Fred.
The Crowdstrike you mention is a good buy. Target price is $285. Fred, the first reason I came here was because I found CrowdStrike to be the best endpoint security platform. Let me explain about it.
Fred Havemeyer: absolutely. Thank you so much for having me on board. CrowdStrike, I’m sure many of you have heard this name. This is the best endpoint security product on the market.
So, if you need something to protect your laptop, workstation, or device, CrowdStrike might be the best software for you. This is a company that excels at detecting and preventing both known and unknown threats. And as we mentioned, and as you mentioned, this year, when the threat landscape has become just exceptionally hostile, we’re making sure that the best we can manage everything, with or without security. We believe that protection is necessary. The threat has been seen before.
Josh Lipton: OK, let’s get to point two, Fred. Let’s look at the second reason you believe. We mentioned this a little bit, but basically he looks out across 2024 and sees the environment becoming increasingly hostile.
Fred Havemeyer: Ah, that’s right.
Josh Lipton: And this is one way. They’re trying to step in and help the CIO protect the company.
Fred Havemeyer: Oh, absolutely. And we’re seeing them really leading this charge all over here. If you look at this year in particular, I think 2023 was already going to be tough, just like 2024.
But as we head into 2024, we have this presidential election cycle, we still have multiple different hot wars going on at this point, phishing attacks are getting more sophisticated with the rise of generative AI, and a lot of things going on, including cartels. You can see that it reaches its climax. Things like activity between attackers, threat actors. We believe we have a very positive cybersecurity demand environment. And we think this is a really solid tailwind for CrowdStrike.
Josh Lipton: Now, the last bullet, Fred. Let’s take a look at this last bullet. One is an attack using Gen-AI.
Fred Havemeyer: Yes, that’s something we’re monitoring very closely. With the rise of generative AI, we believe there are many ways this can benefit businesses. However, we also believe that this lowers the bar for the sophisticated capabilities required for attackers to carry out complex attacks.
We believe this will also make the risk of personalized phishing more pronounced. Therefore, we believe that CrowdStrike is once again well-positioned to mitigate these attacks. As with machine learning on the back end, this is pure play and a machine learning company.
Josh Lipton: Fred, you make a strong case here. For those of you listening now, what are the risks that you should know about before putting money into this name?
Fred Havemeyer: absolutely. It’s always good to have a very healthy perspective on a company. And when we look at CrowdStrike, we tend to think of it as a company that, while we love it, is at risk from saturation in the enterprise market.
You just hit that threshold where you have a significant market share, and that’s not possible. The market needs to go down. In that case, it could become more competitive and we might see companies like Microsoft actually develop products. In that case, enough is enough. It might not be as good as CrowdStrike, but it could compete. And we think competition is potentially where things get a little dicey.
Josh Lipton: Okay, here’s your purchase, Fred. Let’s also take a look at things that don’t really interest us. That’s Octa here. Now, I don’t mean to overstate it, Fred, right? I have no intention of selling it, so I’m neutral.
Fred Havemeyer: No, no, I [INAUDIBLE].
Josh Lipton: So you’re basically on hold. The price target is $80. But let’s take a look at some of these names as well. Why wouldn’t you, Fred, you wouldn’t rush to buy this. The first bullet point is that we are still rebuilding trust. Please talk about it.
Fred Havemeyer: Now, Okta has experienced a number of significant and high-profile data breaches and data issues over the past few years. And the company said that as of this quarter, it is focusing its time, effort, commitment and research and development efforts on enhancing its security practices to prevent future breaches and security incidents of all kinds. future. In other words, the company is focused on what it needs to do: rebuild trust with its customers. However, it takes time and comes with risks.
Josh Lipton: Understood. The second bullet point, the second reason I’m on the middle ground here, is product release delays.
Fred Havemeyer: yes. Accordingly, as the company announced last quarter, it is pausing all product releases except Privileged Access Management and focusing its research and development efforts solely on security. As a result, they have delayed shipping most of their products and are focusing on security.
It also comes with risks. They are doing the right thing to rebuild trust. But doing so could delay product shipments and postpone future growth.
Josh Lipton: Okay, third and final reason, Fred, you sit on the sidelines when it comes to Okta and question the leadership.
Fred Havemeyer: oh yeah. Our core question is whether enough guidance risk has been removed for the trust that needs to be rebuilt, and whether companies have actually removed enough guidance risk if we see churn in this late period. I’m sure you’re wondering this. Year.
Josh Lipton: Last but not least, Fred, what would it take to be more bullish on that name?
Fred Havemeyer: If Okta implements sufficient de-risking guidance, doesn’t see significant churn while it rebuilds trust, and churn remains stable, I think the company is a reasonable value. Now, let’s wait a little while. I’d like to avoid it for now. But there could be a turnaround here if the company shows signs of addressing its security efforts and issues and rebuilding trust.
Josh Lipton: Ok, there’s an upside potential. So let’s wrap this up. So you’re telling investors to buy CrowdStrike based on its profitable growth and AI tools.
Conversely, it also says that you should avoid Okta. You’ll be sitting on the sidelines there as the company is still rebuilding trust and delaying product releases. Fred, thank you for joining us today.
Fred Havemeyer: thank you very much.
Josh Lipton: Thank you very much. And thank you for visiting. Good shopping or goodbye.
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