Investing.com — The cybersecurity sector is poised to stabilize at a fundamental improvement by 2025, given the steady demand for location-based solutions, according to Goldman Sachs.
Companies like Fortinet Inc (NASDAQ:), CrowdStrike Holdings Inc (NASDAQ:), and The company Cloudflare Inc (NYSE:) has seen big gains in 2024, with the stock up 63%, 37%, and 31%.
These leaders have been awarded for their platform-driven approaches, which direct the CIO’s (chief information officer) focus on total cost of ownership and vendor integration. However, point-product companies like it Company Okta Inc (NASDAQ:) and Zscaler (NASDAQ:) lagged behind, with the stock down 12% and 17%, respectively.
Goldman Sachs upgraded Cloudflare Inc (NYSE: ) to “buy” with a price target of $140, given its continued productivity improvements and growth in AI-driven developer services. It is poised for a 28% rise in the stock, fueled by new monetization opportunities in edge computing and AI inferencing.
Although Check Point Software (NASDAQ: ) was downgraded to “neutral” due to pressure on expected EPS growth in 2025. Although the company is expected to benefit from a renewal cycle and increased investment under new leadership, Goldman warned that meaningful revenue growth may not materialize. until 2026.
Other notable calls include Fortinet, which maintains a “buy” rating with a potential upside of 20%. The company is well-positioned to capitalize on an uptick in the firewall renewal cycle, with analysts highlighting Fortinet’s broader sales opportunities in its communications portfolio.
The cybersecurity sector exited by 2024 trades at a 25% premium to the broader software industry based on multiples of business value. This rating reflects the sector’s long-term positive growth, including the risk of breaches, increased regulatory scrutiny, and the adoption of advanced AI technologies.
While the sector is expected to grow by 9% annually through 2025, slowing slightly from 2024, the report notes that downward trends are continuing. This is likely to set the stage for positive revenue growth in the coming quarters.
GS has flagged potential competitive pressures from hyperscalers like Microsoft (NASDAQ: ) and Google (NASDAQ: ), which are expanding their security offerings. It also pointed to geopolitical and macroeconomic uncertainty, especially in key markets such as Europe.
Nevertheless, the broad outlook for the industry remains optimistic.
As cybersecurity companies navigate a highly dynamic landscape, those with strong platform strategies and diverse offerings appear to be best positioned to outperform in 2025 and beyond.
