If you’re looking for cybersecurity stocks to buy in July, a good place to look is the First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) with $6.76 billion in net assets.
It is the largest ETF focusing on cybersecurity stocks, up 13% year-to-date and 28% over the past year. Launched in July 2015, it tracks the performance of the NASDAQ CTA Cybersecurity Index.
“It includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices in order to provide protection of the integrity of data and network operations,” states the CIBR website.
The ETF currently has 29 holdings with weights ranging from 8.92% to 0.20%.
To qualify, each stock must have a market capitalization of at least $500 million, a minimum three-month average daily dollar trading volume of $1 million, and a minimum free float of 20%.
The index employs a weighting methodology based on free-float market capitalization, which includes caps on the percentage of any individual security to derive the final weights of the securities. No security may be weighted less than 0.25%. The index is rebalanced quarterly.
If you buy cybersecurity stocks in July, you’ll want one of these three companies.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is the second-largest holding of CIBR, weighing 8.55%. If you’re wondering why Broadcom has the symbol AVGO, it’s because CEO and founder Hock Tan was the head of Avago Technologies when it acquired Broadcom in 2015 for $77 billion in a cash-and-stock transaction.
On July 15th, AVGO stock had a 10-for-1 split, which saw its share price go from four digits ($1,600) to three ($170). Like most companies, this was to make the shares more accessible and affordable to a greater percentage of investors.
J.P. Morgan analyst Harlan Sur believes booming demand for AI will lead to several quarters of significant growth for semiconductor stocks.
“In custom AI ASICs [application specific integrated circuits], we continue to see strong customer adoption/design win pipeline expansion from Broadcom and Marvell,” Barron’s reported the analyst’s July 15 comments.
In March, Broadcom merged its Symantec business with Carbon Black, acquired as part of its $69 billion acquisition of VMware, to create a new Enterprise Security Group to manage its cybersecurity solutions.
Of the 46 analysts covering AVGO, 83% rate it a Buy.
Palo Alto Networks (PANW)
Palo Alto Networks (NASDAQ:PANW) is CIBR’s fourth-largest holding, with a weighting of 8.20%. Its shares were up nearly 12% in 2024 and 336% over the past five years.
Palo Alto’s cybersecurity products and solutions help keep its customer’s networks safe and secure. Cybersecurity attacks have forced organizations to a “Zero Trust” model. Palo Alto’s firewalls have become a network security necessity.
However, now that Google is closing in on Israeli cybersecurity startup Wiz, Palo Alto may have to go on an M&A offensive to keep pace.
“We believe a potential GOOG-Wiz transaction could spark an M&A cycle that could include not only small tuck-in players but publicly traded companies that have become platform leaders in their various categories,” Investor’s Business Daily reported comments from TD Cowan analyst Shaul Eyal.
Of the 52 analysts covering PANW, 71% rate it a Buy.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) is CIBR’s 14th-largest holding, with a weighting of 3.63%. Its shares are up 2% in 2024 and 236% over the past five years.
The California-based cybersecurity company specializes in security solutions. This includes firewalls, endpoint security, intrusion detection and prevention systems and antivirus and anti-spam protection.
Fortinet has over 755,000 customers worldwide and generated $1.41 billion in Q1 2024 billings. Its current TAM (total addressable market) is $144 billion and is expected to grow to $222 billion by 2028.
In 2023, its free cash flow was $1.7 billion, good for a 33% margin. Since its IPO in 2009, it has aimed to achieve the “Rule of 40” every year. This is when its revenue growth rate plus profit margin exceeds 40%. It’s met that goal in 12 out of 16 years.
It has grown billings and revenues at over 20% and 22% compounded annually, respectively, since 2020.
TD Cowan recently upgraded its stock from Hold to Buy with a target price of $75. This is significantly higher than its current trading price.
“The analyst firm also notes that Fortinet is likely to benefit from the growing implementation of on-premise Generation-Artificial Intelligence (Gen-AI) technologies,” Investing.com reported TD Cowan’s comments.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
