Cyber-Goblins & Golden Shares

Now, listen closely. There’s been a right kerfuffle in the software factory, all thanks to a clever contraption dreamed up by a bunch of brainboxes at Anthropic. They’ve built something called Claude, a sort of digital imp, and this imp, Claude, is showing the big, blundering businesses that their shiny, expensive software isn’t quite as clever as they thought. It’s like bringing a slingshot to a cannon fight – unsettling, to say the least. Analysts are sniffing around, recalculating everything, and the market, well, the market is getting a bit twitchy.

This Claude, you see, has sprouted a little side-project called Claude Cybersecurity. It’s a sort of digital bloodhound, sniffing through computer code for nasty little loopholes. It can even fix them, patching things up with AI-generated fluff. Some folks reckon this is bad news for the companies that sell us all the digital locks and bolts. But I, for one, think it’s rather splendid. Because in a world where digital imps are poking and prodding at everything, security is more important than ever. And that, my friends, means opportunity. Let’s have a look at three companies that might just benefit from this digital mayhem.

1. Palo Alto Networks

Palo Alto Networks (PANW 3.20%) is a bit like a very ambitious beaver, constantly building and expanding its dam – I mean, its portfolio of security services. They’re aiming to be the one-stop shop for everything that keeps the digital baddies at bay. Just recently, they swallowed up CyberArk, adding a particularly strong set of digital chains to their collection. A clever move, that.

You see, as more and more of our lives – and our company secrets – drift up into the cloud, and as we all work from our sofas in our pajamas, the number of places a digital rascal can sneak in multiplies like rabbits. That requires a whole host of defenses. And companies, quite sensibly, are getting tired of dealing with a dozen different security fellows. They want one reliable chap to handle everything. Palo Alto, with its beaver-like industriousness, is positioning itself to be that chap.

Their main trick is something they call “platformization.” It’s a fancy word for selling you lots and lots of services, covering all your bases. They’ve got Strata for keeping the network safe, Prisma for the cloud, and Cortex for spotting trouble on your computers. As of late, they’ve managed to convince 1,550 customers to buy the whole kit and caboodle. And those customers, bless their sensible hearts, are spending a whopping 119% more each year. That’s what I call a healthy appetite for security!

Now, Palo Alto’s recent results haven’t been terribly exciting – their old-fashioned hardware business is dragging things down. But their new, software-based services are booming, growing by a rather impressive 33%. The stock might seem a bit pricey at 46 times earnings, and 12 times sales estimates. But considering their position, their shift towards cleverer sales, and the general trend towards fewer security fellows, I reckon it’s a fair price to pay. A perfectly reasonable price, indeed.

2. ZScaler

ZScaler (ZS 1.98%) provides a sort of digital moat around a company’s secrets. It ensures that only the authorized folks – and devices – can get in. Instead of routing everything through a central fortress, it sends traffic directly through ZScaler’s platform, speeding things up and making it easier to keep the riff-raff out.

They’ve recently launched a service called AI Protect, designed to help companies build and control AI within their networks. This could be rather important as companies start letting these digital imps loose on their data. You need to keep a watchful eye on those things, you see.

ZScaler is also switching from charging per user to charging based on how much data is used. In the age of AI imps, which can generate mountains of data from a single “user”, this is essential. Last quarter, their non-seat revenue climbed over 100%, contributing a hefty 25% to the average contract value. A very clever move, that.

With more and more software drifting up to the cloud, ZScaler stands to benefit from the growing tide of network traffic. They’re also rather good at convincing existing customers to spend more money. Their overall revenue grew by 26% last quarter, with annual recurring revenue climbing 25%. That suggests a long runway for growth. Investors should expect similar growth for the foreseeable future, driven by increased usage-based billing.

At 38 times earnings and 7.4 times sales, the stock looks like a good value right now, given the trends pushing its results higher. A perfectly sensible price, I’d say.

3. SentinelOne

SentinelOne (S 0.93%) specializes in protecting your computers from digital attacks. It’s built from the ground up with artificial intelligence. Its main advantage is that it puts more of the brains on the computers themselves, instead of relying on cloud-based servers. That speeds things up, which is rather important when digital imps are causing trouble.

However, SentinelOne faces stiff competition from much larger companies with deeper pockets. They’ve been spending heavily on sales and research to grow their business. They’re also expanding their offerings to include a broader range of services, as companies look to simplify their security arrangements.

Despite their efforts, investors have been a bit disappointed with SentinelOne’s results lately. Revenue growth is slowing, rising only 20% in the fourth quarter. Their outlook for 2027 suggests a reacceleration in revenue may be a while off.

To be sure, SentinelOne is a bit of a risky investment, given the competition. But investors have bid the stock price down to a point where it looks rather attractive. It trades for less than 4 times management’s revenue outlook for the year. At that price, it may be worth starting a small position in your portfolio. A small one, mind you. A cautious approach is always best.

2026-03-20 18:56

1. Palo Alto Networks

2. ZScaler

3. SentinelOne

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