2 Overpriced Cyber ​​Security Stocks to Avoid in April

2 Overpriced Cyber ​​Security Stocks to Avoid in April

While the war between Russia and Ukraine has created a significant opportunity for the cyber security industry, and investor interest in cyber security companies has increased with companies preparing for potential cyber attacks from Russia, the liquidation broader technology has spoiled the industry’s upside potential.

Recently, St. Louis Fed President James Bullard said that the US Federal Reserve needs to increase its reference interest rate at 3.5%. Concerns about aggressive interest rate hikes are dampening investor sentiment on technology and cybersecurity stocks. This is evident in the iShares Cybersecurity and Tech ETFs (IHAK) Decrease of 3.5% in the last five days.

Although demand for cybersecurity is expected to remain strong due to rapid global digitization and the resulting rise in cyberthreats, overvalued stocks with weak financials could experience a short-term downtrend.

Therefore, we believe that Okta, Inc.’s fundamentally weak cybersecurity shares (OKTA) and Rapid7, Inc. (RPD), which are currently trading at high valuations, are best avoided now.

Click here to see our Cybersecurity Industry Report for 2022

Okta, Inc.OKTA)

Headquartered in San Francisco, OKTA provides identity solutions for enterprises, small and medium-sized businesses, universities, non-profit organizations and government agencies in the United States and internationally. With over 7,000 pre-built integrations for applications and infrastructure providers, OKTA provides simple and secure access to people and organizations everywhere.

Adam Tindle, analyst at Raymond James OKTA recently downgraded to the performance of the strong buying market.

OKTA’s total revenue increased 63.2% year over year to $383.01 million for its fiscal fourth quarter, ended January 31, 2022. However, its net loss was $241.19 million, compared with a net loss of $75.81 million in the previous year. period. Its loss per share was $1.56, compared to a loss of $0.58 per share in the prior period. Additionally, its cash and cash equivalents totaled $260.13 million for the period ended January 31, 2022, compared to $434.61 million for the period ended January 31, 2021.

In terms of progress YOU SEE, OKTA’s 12.89x is 311.3% higher than the industry average of 3.13x. Additionally, its forward P/S of 12.93x is 296.4% higher than the industry average of 3.26x.

OKTA’s EPS is expected to remain negative in 2023 and 2024. In addition, its EPS is estimated to decline 171.7% in 2023. Its stock price has declined 33.7% over the past year to close the deal. yesterday’s trading session at $147.57.

OKTA POWR Ratings reflect their poor prospects. POWR ratings evaluate stocks based on 118 different factors, each with its own weighting. The stock is rated D overall, which is equivalent to Sell in our POWR ratings system.

OKTA is rated D for Value, Stability, Feel and Quality. Click here to access additional POWR Ratings for OKTA (Growth and Momentum). OKTA is ranked #27 out of 31 stocks in the F ranking Software – Security industry.

Rapid7, Inc. (RPD)

Boston-based RPD offers cybersecurity solutions. The company offers a cloud-native information platform that enables customers to create and manage analytics-driven cybersecurity risk management programs.

RPD’s total revenue increased 34% year over year to $151.64 million for the fourth quarter, ended December 31, 2021. However, its non-GAAP net loss was $8.93 million, compared to a loss of $3.73 million in the previous period. year, while its non-GAAP loss per share was $0.16, compared to a loss of $0.07 per share in the prior period. Additionally, its non-GAAP gross margin came in at 71% compared to 73% in the same period a year ago.

In terms of forward EV/S, RPD’s 10.09x is 222.1% higher than the industry average of 3.13x. Additionally, its forward P/S of 9.08x is 178.5% higher than the industry average of 3.26x.

Analysts expect RPD’s EPS to decline at a rate of 57.1% for the quarter ended June 30, 2022. Share price is down 8.8% YTD to close session yesterday’s trading at $107.39.

RPD is rated D overall, which equates to Sell in our POWR rating system. It has a D rating for Value.

We have also rated it for Growth, Momentum, Stability, Sentiment and Quality. Click here to access all RPD ratings. It is ranked number 22 in the Software – Security industry.

Click here to see our Cybersecurity Industry Report for 2022


OKTA shares were trading at $144.71 per share on Friday afternoon, down $2.86 (-1.94%). Year-to-date, OKTA is down -35.45%, versus a -4.99% rise in the benchmark S&P 500 index over the same period.

About the author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, helps investors make informed investment decisions through his insightful commentary. Plus…

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