CyberArk leads cybersecurity software 'top picks' into 2025: JP Morgan
J.P. Morgan has identified CyberArk, Zscaler, SentinelOne, and Okta as its top picks in cybersecurity software for 2025, citing strong demand and favorable market conditions. The firm also favors CrowdStrike and Palo Alto Networks for their long-term market leadership. Analysts emphasize the importance of companies with exposure to enterprise budgets and high-priority spending. A study indicates that managing digital identities is a top security priority for 22% of businesses, reflecting a rise in credential-based threats. The securing of artificial intelligence is expected to be a significant theme in 2025.
CyberArk (NASDAQ:CYBR), along with Zscaler (NASDAQ:ZS), SentinelOne (NYSE:S) and Okta (NASDAQ:OKTA) stand as J.P. Morgan's "top picks" in security software names heading into 2025.
This is due to a combination of factors including "a healthy demand backdrop, reasonable expectations, and a number of attractive setups for better than expected execution."
J.P. Morgan also likes industry stalwarts CrowdStrike (NASDAQ:CRWD) and Palo Alto Networks (NASDAQ:PANW) from a long-term perspective, as they are expected to remain dominant share leaders in the cybersecurity market.
CrowdStrike, Palo Alto Networks and SentinelOne all appear set to benefit from elevated cloud security demand in 2025. CrowdStrike reported year-over-year growth of 80% in the category, leading to annual recurring revenue of $515M in cloud security by mid-2024. Palo Alto Networks and SentinelOne cloud security offerings led to new ARR of $700M and $100M, respectively, according to J.P. Morgan.
"We are sticking with our framework of focusing on stocks of companies with favorable exposure to large enterprise budgets, high-priority CIO spending categories, and ability to benefit from share consolidation within their markets," said J.P Morgan analysts, led by Brian Essex, in an extensive report on the 2025 security software outlook.
"Near-term, we see opportunity with next-generation technology vendors that have been able to establish best of breed status within their segments and may be efficiently expanding into adjacent markets to establish a platform," Essex noted. "Longer term, we see an opportunity with established platforms that have continued to build and acquire to consolidate share by leveraging their platform status across their installed bases."
J.P. Morgan also points to a study by the Identity Defined Security Alliance that found 22% of businesses said managing and securing digital identities ranks as the No. 1 priority of their security program, compared to 17% one year prior. This is due to a 71% spike in threat actors using log-in credentials to compromise enterprises.
The rise of artificial intelligence also looks to be a key theme headed into 2025.
"Securing artificial intelligence will also be a theme in 2025," Essex noted. "We think that solutions to securing AI currently exist in a highly fragmented and nascent market, and that sustained investment from bigger players in the security space will likely increase competition and available solutions."