The rising demand for cybersecurity solutions has helped stocks in this space attract significant investor attention. Consequently, many cybersecurity stocks are currently trading at prices that are not justified by their current financials or growth prospects. For instance, given their limited growth prospects, we think the stocks of CrowdStrike Holdings (NASDAQ:CRWD), Fortinet (NASDAQ:FTNT), and Zscaler (NASDAQ:ZS) look significantly overvalued at their current price levels. So, they are best avoided now. Read on.The demand for cybersecurity is at near record highs because cyberattacks have become more frequent over the past year. A massive U.S. government and corporate data breach last year, the Colonial Pipeline attack last month, and several other attempts to attack government agencies and corporations have heightened the demand for highly secure cyber security solutions in the United States and globally. In light of these developments, Gartner (NYSE:IT) predicts cybersecurity spending will increase 12.4% year-over-year to $150.40 billion in 2021.
However, investor optimism over the industry’s solid growth prospects has led to valuations that in some cases are inconsistent with companies’ growth potential.
In considering the current financials and growth prospects of CrowdStrike Holdings, Inc. (CRWD), Fortinet, Inc. (FTNT), and Zscaler, Inc. (ZS), we think their shares look extremely overvalued at the current price levels. So, these stocks are best avoided now.