Cybersecurity stocks came under pressure again on Thursday amid renewed AI jitters, after notable gains on Wednesday following Anthropic’s debut of Project Glasswing, the AI startup’s defensive cybersecurity initiative. This came despite analysts’ bullish view of the initiative, even as BTIG flagged future demand concerns about industry peer Zscaler (ZS).
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At the close of Thursday’s trading, shares in the following cybersecurity companies plunged:
- Palo Alto Networks (PANW) — 3.91% to $166.99
- CrowdStrike Holdings (CRWD) — 7.46% to $394.68
- Cloudflare (NET) — 8.62% to $193.05
- Zscaler (ZS) — 11.33% to $122.23
‘A Meaningful Increase in Competition’
BTIG analyst Gray Powell on Thursday downgraded Zscaler from Buy to Neutral. The analyst noted that while his team’s independent field checks with industry contacts over the past week indicated that demand for Zscaler’s products seemed stable in the short-term, the feedback they got “skewed cautious” across the majority of their contacts in terms of demand for the next six to 12 months.
Zscaler helps enterprises to secure their internet connection and monitor their digital performance across networks. However, Powell — who did not set a new price target for ZS stock — said the equity research firm was not seeing indications of “a meaningful increase in competition” from multiple sources.
The analyst named Cloudflare and Netskope (NTSK) as the two most direct challengers to Zscaler.
AI Security Not ‘A Zero-Sum Game’
Meanwhile, RBC Capital analyst Matthew Hedberg has contended that Anthropic’s Project Glasswing is “most positive” for both CrowdStrike and Palo Alto Networks. With both as partners on the project, Hedberg believes the initiative underscores their “strategic positioning as cybersecurity consolidators.”
Chipping in, Benchmark analyst Yi Fu Lee noted that AI-powered security is not “a zero-sum game” but means more market for leading cybersecurity firms. Lee added that such development can help CrowdStrike and Palo Alto Networks capture about $1 billion in new revenue.
Which Is the Best Cybersecurity Stock to Buy?
Of all the cybersecurity firms mentioned in this article, Netskope (NTSK) remains the biggest investment opportunity, according to the TipRanks Stock Comparison tool.
NTSK offers about 109% upside based on an average price target of $17.67. It also enjoys a Strong Buy consensus rating from analysts.
