Synthetic intelligence-driven panic erased roughly $300 billion of market worth on Feb. 3 throughout the software program business, in response to Forbes.
Cybersecurity shares have additionally been caught up in the identical sell-off, and Morgan Stanley analyst Meta Marshall thinks that is the proper time for traders to understand that AI is a tailwind for cybersecurity, and that the market is poised for enormous progress.
She mentioned AI expands the assault floor and improves the assault vectors.
The bigger assault floor is brought on by the utilization of AI to jot down code, by working LLMs, and by brokers. LLMs are weak to immediate injection assaults and may leak proprietary info. AI-generated code usually introduces safety vulnerabilities. AI enhances hackers’ offensive capabilities by enabling superior phishing, immediate injection, and knowledge poisoning.
Elevated AI utilization will improve the necessity for safety investments to:
- Defend towards AI-based assaults
- Defend AI utilization
- Use AI for safety
Supply: Morgan Stanley analyst Meta Marshall
“With 14% of organizations already reporting an AI breach and 16% noting their breaches used AI, this has become an urgent spend priority,” Marshall wrote in her note shared with me. “If security spend intensity eventually matches IT spend intensity, AI security could become a $45bn+ market in [the] coming years, from ~$16bn today, a 30-40% CAGR.”
Final yr, it actually felt as if the assaults have been turning into extra widespread and efficient. I wrote in regards to the largest ones in my article “5 things you should know about cyberattacks in 2025.”
Morgan Stanley believes AI use will develop the cybersecurity market to $45 billion.
Photograph by sarayut Thaneerat on Getty Photos
Morgan Stanley is probably the most constructive about CRWD and PANW
Marshall mentioned she is most constructive on CrowdStrike (CRWD), because of the few mergers and acquisitions or reminiscence overhang. She reiterated an equal-weight (maintain) ranking for CrowdStrike and a $537 value goal.
CrowdStrike is down 8.35% yr up to now, at $429.64, on the time of writing Saturday morning, Feb. 14. The upside is near 25%. The corporate will report earnings on March 3.
Analyst’s subsequent selection is Palo Alto Networks (PANW). She mentioned she is optimistic in regards to the firm, significantly now that it has accomplished acquisitions of Chronosphere and CyberArk. She reiterated an chubby (purchase) ranking for Palo Alto Networks and the worth goal of $245.
Palo Alto Networks is down 9.36% yr up to now, at $166.95. The upside is near 47%. The corporate will report earnings on February 17.
Whereas huge gamers CRWD and PANW could possibly be seen as apparent decisions, Marshall turned her consideration to the shares for which she sees “checks continuing to be positive.”
Morgan Stanley sees nice long-term alternatives in these Cybersecurity shares
Marshall mentioned that Zscaler (ZS), SentinelOne (S), Netskope (NTSK), and SailPoint (SAIL), which have all been crushed up yr up to now, are nice long-term alternatives with very engaging entry factors within the close to time period.
For Zscaler, the analyst expects upside to the consensus Q2 annual recurring income (ARR) of 24% to 25% yr over yr, because of the sturdy pipeline, which suggests damaging 26% quarter-over-quarter seasonality for the web new ARR (NNARR). That is properly under the historic common, given final quarter’s Pink Canary contribution.
She reiterated an chubby ranking for Zscaler and a value goal of $305. Zscaler is down 20.99% yr up to now, at $177.72. The upside is a whopping 71%. The corporate will report earnings on February 26.
For SailPoint, she expects upside to consensus estimates and administration’s steering (on the midpoint) for Whole ARR of $1,122 million (+28% YoY), implying QoQ progress of +8% and NNARR of $82 million. She reiterated the chubby ranking for SailPoint and the $25 value goal. SailPoint is down 21.3% yr up to now, at $15.92. The upside is 57%.
Extra AI Shares:
- Morgan Stanley units jaw-dropping Micron value goal after occasion
- Financial institution of America updates Palantir inventory forecast after personal assembly
- Morgan Stanley drops eye-popping Broadcom value goal
Marshall expects SentinelOne to report This autumn income modestly above administration’s steering of $271 million, implying roughly 20.2% YoY progress. Analyst reiterated Equal-Weight ranking for SentinelOne and the worth goal of $18. SentinelOne is down 7.53% yr up to now, at $13.87. The upside is 29.7%. The corporate will report earnings on March 12.
The analyst believes that Netskope will obtain ARR progress of greater than 30% YoY in This autumn, pushed by bettering gross new bookings and internet retention developments over the previous few quarters.
She additionally expects This autumn income progress to return in above consensus, at roughly 27.5% YoY. Marshall reiterated the chubby ranking for Netskope and the $27 value goal. Netskope is down 32.21% yr up to now, at $11.89. The upside is an incredible 127%. The corporate will report earnings on March 11.
Ticker
Firm Title
Present Value*
Value Goal
Potential Upside
MS Ranking
CRWD
CrowdStrike
$429.64
$537.00
~25%
Equal-Weight
PANW
Palo Alto Networks
$166.95
$245.00
~47%
Over-Weight
ZS
Zscaler
$177.72
$305.00
~71%
Over-Weight
SAIL
SailPoint
$15.92
$25.00
~57%
Over-Weight
S
SentinelOne
$13.87
$18.00
~30%
Equal-Weight
NTSK
Netskope
$11.89
$27.00
~127%
Over-Weight
The creator has no place within the shares talked about on the time of publication.
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