While the demand for cloud security products and services has increased tremendously over the past year with growing cyberattacks, not all companies in this crowded space are good bets. For instance, though we think it could be worth betting on cloud security stocks Mimecast (NASDAQ:MIME) and Qualys (NASDAQ:QLYS), which are expected to gain in the near term based on their fundamental strength, conversely, Okta (NASDAQ:OKTA) and Rapid7 (NASDAQ:RPD) don’t possess attractive growth potential and we think are best avoided now. Let’s discuss.The remote lifestyle and a rapid digital transformation have led to increasing ransomware attacks and generalized hacking, given the heightened dependency on cloud computing. Investors’ interest in the cloud security space is partly evident in the First Trust NASDAQ Cybersecurity ETF’s (CIBR) 6.5% returns over the past month.
According to cybersecurity firm Sophos, the average total cost of recovery from a ransomware attack has more than doubled in a year, increasing to $1.85 million in 2021 from $761,106 in 2020. So, cloud security companies’ products and solutions are expected to be in high demand in the coming months. However, not all companies are expected to perform well in this crowded space.
Given this backdrop, we think it could be wise to scoop up the shares of quality cloud security stocks Mimecast Limited (MIME) and Qualys, Inc. (QLYS) based on their continuing innovations. In contrast, we think it is better to avoid Okta, Inc. (OKTA) and Rapid7, Inc. (RPD) because their near-term prospects look bleak.