Hedge Funds Are Loading Up on These 2 'Strong Buy' Cybersecurity Stocks!

Hey everyone, it is Julie here with TipRanks and today we're taking a look at two cybersecurity stocks that Wall Street rates a strong buy and hedge funds have been buying up lots of lately. So, let's get into it. All right guys, welcome back. Thank you all so much for being here. Cyber attacks are not slowing down. They are only accelerating and while cybersecurity used to be a niche sector of the tech industry, it is not anymore. So, today we're diving into two names in the cybersecurity space that hedge funds have been buying up shares of lately and come in with a strong buy consensus from Wall Street analysts. You can follow along with today's stocks on the TipRanks website or right on the TipRanks mobile app. Links to download are in the description below. And right now TipRanks is having a 70% off sale. So, if you've been wanting to unlock some premium investment research tools, now is a great time to do so. Links for the sale will also be down below. If you enjoyed today's video, make sure you hit that thumbs up button and that you're subscribed to the channel. Now, let's dive right into our two cybersecurity stocks. First on the list is one of the largest pure-play cybersecurity companies in the world. We're looking at Palo Alto Networks. They trade under the ticker PANW, currently priced at $326 per share. Now, we have talked about this stock before. Most recently was back near the end of December. In the past year, the stock has gained 48% and has climbed 97% in just the last 3 months. They do score a nine out of 10 on the TipRanks Smart Score. Palo Alto is a global leader in providing advanced cybersecurity solutions. They protect enterprises, governments, and cloud environments from cyber attacks across three main platforms: network security, cloud security, and AI-powered security operations. Think of them as the full stack defense layer for the modern enterprise. Whether a company is running in the cloud, on premise, or anywhere in between, Palo Alto has a product for it. And increasingly, those products are being bundled together, which is a key part of their growth story. In the last quarter, we saw hedge funds increase their overall holdings by 2.4 million shares, which was a notable increase from the previous quarters. When we look at the list of hedge fund activity down below, we can see some existing hedge funds increasing their already large positions, plus a long list of hedge funds starting brand new ones. Their most recent earnings report was on June 1st, and we saw records across the board. Earnings per share of 85 cents came in 6 cents ahead of analyst expectations, while their revenue hit $3 million, which was up 31% year-over-year. Free cash flow surged 57% to 910 million, and their next-gen security ARR, which is a key metric that Wall Street watches, reached 8.13 billion, up 60% year-over-year. The company surpassed every guided metric and raised their full-year fiscal guidance. And following that earnings report, we had quite a few Wall Street analysts increasing their price targets, including one at Goldman Sachs. They said the most important data points from the quarter are those that indicate that AI is driving incremental security spending. They added that they expect to see more market share shift in categories like security operations and observability, and increased demand for specific product cycles, such as Cortex Runtime Agentic Security, Protect for AI App and Model Security, Agentic Identity, and AI Infrastructure. The big story here is Palo Alto's platformization, getting customers to consolidate their cybersecurity spending onto a single Palo Alto platform, rather than using multiple point solutions from different vendors. They now have 2,280 platformized customers and that cohort shows a 120% net retention. Meaning customers are spending more over time, not less. Management expects to surpass 4,000 platformizations by 2030. The Palo Alto stock does have 39 current analyst ratings and comes in as a strong buy with 34 buys and five holds. The current average price target of $326 is actually flat compared to today's prices, but we do have a wide range of low to high-end price targets. Looking at some of those recent ratings down below, we do have downsides as much as 22% while we have a high-end price target of 375 for an upside of nearly . For our second cybersecurity stock, we're taking a look at Rubrik. They trade under the ticker RBRK, currently priced above $76 per share. This is another stock we've touched on before, most recently in April. The stock is in the red over the last year, down 19% but in the last 3 months has gained 58% and they currently score a 10 out of 10 on the TipRanks Smart Score. Rubrik is a cloud data security company solving a specific but critical problem, protecting enterprise data from ransomware and cyber attacks and ensuring rapid recovery when something goes wrong. They sit at the intersection of data backup, cybersecurity and cloud infrastructure and they're expanding into identity security and AI governance. Think of them as the last line of defense. When everything else fails, Rubrik is the company that makes sure you can get back up and running. And of course, we also saw increased hedge fund activity for the Rubrik stock as well with hedge funds increasing their holdings by roughly half a million shares last quarter. Now, this is a shorter list here down below that was driven primarily by two new hedge funds starting up brand new positions. Rubrik shared their Q1 earnings report on June 3rd, where we saw record Q1 performance and key metrics. They reported Q1 earnings per share of 16 cents when analysts were anticipating a loss of 3 cents per share. Their subscription ARR, which is one of their core growth metrics, hit 1.57 billion, and that was up 32% year-over-year. Subscription revenue grew 41% and they added a record 103 million in net new subscriptions. Their identity security business is worth highlighting specifically, as it crossed 50 million in ARR this quarter, growing 38% sequentially. And identity is one of the hottest areas in cybersecurity right now, and Rubrik is moving into it aggressively. And of course, following that earnings report, we heard from plenty of Wall Street analysts, including one at CIBC, who noted that the company reported a clean beat in Q1 and guided fiscal 2027 ahead of estimates. They said that the quarter reinforced Rubrik's core long-term thesis of durable 20% growth, stronger net new annual recurring revenue, and a credible path to higher margins and free cash flow. One of the most forward-looking pieces of Rubrik's story is their agent cloud product, built on an acquisition of Prebid base and a partnership with Anthropic. It's early stage, but they've already seen enterprise production deployments, including a major US financial services firm running it across AWS Bedrock and Microsoft Copilot. If the AI data governance opportunity scales the way management thinks it's well, this is a company with a much bigger addressable market in 2 to 3 years than it has today. With 25 current analyst ratings, the Rubrik stock comes in as a unanimous strong buy, and the average price target of $92 implies an upside potential of 18 and 1/2%. Looking at those recent ratings down below, our upsides range from a low end, a few of them about 16% to a high-end upside of 48 and 1/2% So, that is a quick look at two cybersecurity stocks, both with increased hedge fund activity and a strong buy rating from Wall Street. Let me know your thoughts on these two companies and which one you'd put on your watchlist. I always love hearing from you guys. And of course, keep in mind these videos are never a suggestion to buy or sell any specific stock. So, please make sure you're always doing your own research and due diligence. Thanks so much for watching. Have a wonderful day and I'll see you back here next time.