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Buy these software stocks as cyberattacks climb, Stephens says

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Cybersecurity investments are ramping up as attacks increase, and investors looking to invest in the space should look at names such as Okta and CrowdStrike, Stephens said. Analyst Brian Colley initiated coverage of five software security names including Okta and CrowdStrike , saying in a Tuesday note to clients that both companies can benefit from rising demand for cybersecurity as cyberattacks escalate and valuation multiples have “dramatically” stepped back. The firm slapped overweight ratings on both companies. Among the reasons for liking Okta, Colley cited benefits from growing cloud adoption and hybrid IT. He also thinks the stock is trading cheap compared to peers following a sell-off amid the Lapsus$ hack. For CrowdStrike, Colley cited the company’s free cash flow among his reasons for the initiation. “We believe the company can sustain 35%+ ARR growth over the coming years while generating 30%+ FCF margins, driven by 1) multiple secular tailwinds (proliferating endpoints/cloud workloads, etc.), 2) an ever-expanding TAM/product offering, 3) growth in its emerging products, 4) continued strength in cross-sell/upsell, and 5) continued market share gains,” Colley said. Shares of Okta and CrowdStrike this year have plummeted 63.2% and 28.4%, respectively, but are poised to bounce back. Upcoming earnings from both companies could serve as catalysts for the stocks, Colley said. Stephens has a price target of $145 per share on Okta; its CrowdStrike target is at $232 per share. Based on those forecasts, Okta and CrowdStrike can gain 75.6% and 58.2%, respectively, from their Wednesday closing prices. The firm also initiated coverage of Zscaler , CyberArk and KnowBe4 . — CNBC’s Michael Bloom contributed reporting

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