The UNTHINKABLE is About to Happen to These 3 Stocks. Don’t Miss It.

These stocks jumped more than 100% from April to June, but they are essential to the future growth of AI. Joining us today is Marketbeat analyst Thomas Hughes with a list of three stocks on his buy list in a really hot sector. Again, Thomas, everyone's been so focused on the huge growth we saw in AI from April to June. But there's another sector that had been really beaten down this year that has now more than doubled in just a really short time frame, and that is cyber security. And yes, this sector is very closely tied to the AI story. We're going to get into that and Thomas is going to share his list of three stocks. Actually, we're really going to cover four different cyber security stocks today as well as an ETF. So, there's a lot to cover, but I want to start out with what is happening in the cyber security space and why we're seeing such a huge runup right now. >> Well, right. So leading up until the first part of this year, cyber security stocks were being supported by increasing digitization and services penetration globally because businesses are leaning more into the cloud and consumers are leaning more into those services. So then AI comes along and really juices the outlook. We saw new highs in the last year and then a massive sell-off that was based on AI disruption fears. What's emerging now though is that AI disruption fears are really misplaced. AI is not disrupting these softwarebased companies the way that these softwarebased companies are using AI to improve their businesses. And within that cyber security has emerged as really like the very first most basic critical layer in the software stack for AI. You cannot do AI without cyber security. You can build whatever model you want, use whatever data you want, but without securing them, you can't rely on the data or the model which makes them very dangerous to use. Cyber security is is the base layer of all of it. Within that we have this huge data center buildup going on right now. Uh the data center capacity is expected to double and then double again over the next you know 2, three, four, five year periods which just means increased capacity for AI and for inference and model training and increased need for cyber security. So this really huge massive bullish backdrop is driving a sector that's highly fragmented. You've got some big players are consolidating and gaining market share, but also platformizing uh their services. So, they're offering a consolidated unified service in one package. So, it's all just like a win-win for the businesses that are succeeding. >> Yeah, I know a lot of these names that we're going to talk about today did get lumped into that software apocalypse that we saw in that March, April time frame. And you were one of the analysts we had on the show. We had several analysts on talking about these cyber security stocks are um unreasonably oversold because of exactly that argument you just made. It's an argument you made back in April when many of these stocks were at their bottom. And again, we've seen this massive rally since then. And just knowing our viewers and what I hear from people in the comments all the time is why would you be talking about a sector after it's already run up? Well, we were talking about this one plenty of times when it was down at that bottom. And so I want to address that before we get into the specific names too, Thomas. Do you think that these names are still interesting buys for investors right now? If you didn't buy at that bottom back in April, they've run up that 100% already. What's the the case for there's still some room for some gains for the retail investor? >> Oh, well, this market has really just woken up to the reality of what's happening, and that is just systemic demand for these businesses that's going to continue to grow over the next couple of years. So right now what we have happening is growth is accelerating and the forecasts are accelerating and we're still not sure where the ceiling is for that. So in in that regard we do have upside left with some of these stocks. There is some risk with high valuations relative to the current year outlook. But we're pricing in long-term forecasts that cut those valuations uh down to like 15x uh within 10 years. And then assuming that these forecasts are still too cautious, those valuations are even lower. So, what we're looking at now is opportunities for long-term investors to get into these stocks and hold on to them for a while and benefit from these long-term trends and see their share prices appreciate over time. >> Yeah, I think the three names you're going to cover today have similar growth stories, although they're all a little bit different. Their earnings are a little bit different, too, but their charts look very similar, and it's kind of more of this whole sectorwide, this whole cyber security sector is seeing the kind of growth at the same time. And that's true if you look at that cyber security ETF. Let's take a look at that quick, Thomas, and your thoughts on just investing in the entire sector because we're seeing so much systematic growth versus investing in one of the individual stocks that we're going to talk about today. >> Yeah. Uh the CIBR um cyber security ETF is a great way to get into this market. The top holdings align with a lot of my top picks. All these stocks are seeing benefits from similar trends, you know, and that includes data center and AI, but there's also uh geopolitics and regulatory compliance. many industries uh have to maintain really strict compliance with their data and their processes. And with AI starting to get into the mix, it just increases their needs as well. >> Yeah, I think the ETF is an interesting way to look at this because again, a lot of this sector is moving together. But there's also some benefits to picking individual stocks and picking the companies that you think are going to be the biggest winners in the cyber security story. So, that's what we're going to get into in this list. But there's one name missing from this list because they're not really fitting the trend right now, and that's Zcaler. I've had a few different viewers asking for us to cover Zcaler. Spoiler alert, it's not on Thomas's list today. Why is that, Thomas? >> Uh Zcaler is another good choice, I think. But there were some headwinds that emerged, some company specific headwinds that emerged in the last report. Where most other companies are accelerating growth, Zcaler is uh forecasting a slowdown. But on top of that, that's compounded by an executive shakeup. Uh some key members of their sales team have left. So they've got a gap in their sales force that's probably going to impact their sales in the the near term at least. They did mention that in the guidance and that certainly had an impact on market sentiment. >> Yeah, if you look at the chart, you can see uh comparing that to the cyber security ETF chart, Zcaler is in a very different situation right now. It's almost as if it hasn't rebounded at all from the lows that it started to experience in April. Um, is there enough of a headwind to equate that difference between where the rest of the cyber security market is headed and where Zcaler is right now? >> Well, I think for speculators and people looking to make uh the biggest gains in the shortest amount of time, Zcaler might be the better choice of these stocks simply because of where it is, but it does present some risks in the near term. Uh, the market could continue to fall. I do think that we're near the bottom in that one. It's really just a matter of how long it wallows at these levels and when uh the catalyst for the uh the rebound emerges that could come in the upcoming results, but it it still may be a few more quarters. >> I want to get your take on as an investor, you're an analyst, you've been doing this for a long time. For you, is it a red flag when one stock in a sector is trading completely different than the rest of the sector? Is that a red flag for you or can it be explained sometimes? >> Well, I mean, in this case, it's it's a company specific event and that's usually the case. The deeper you dig, the more you find usually and eventually you'll find the reason why one stock is underperforming. In this case, it's strictly the outlook. It's not the strength of the results. It's just the outlook for deceleration and then the impact of the executive shakeup. Uh but once that gets resolved and the company regains its footing, the stock price uh should follow suit. >> Yeah, like you said, the earnings report for Zcaler actually looked pretty good. It's it's a beat. It doesn't look too different than the rest of the the names we're going to talk about, but like you said, the guidance is definitely the problem here. Let's talk about though the future outlook according to analysts and price targets for this one. Uh, this one actually looks like it has upside right now compared to some of the other names we're going to get to that have run up quite a bit and I know you're going to make a really good case for why it's still an interesting time to get into those. But let's talk about that analyst forecast and the potential upside for Zcaler. Is it a more attractive entry point for those riskon investors? >> Well, right now uh it does have more upside potential at the consensus, but that's just because it stock price has not responded to the results the way that the other companies have. Those stocks are rising into their consensus. Zcaler is still kind of, you know, wallowing down at these low levels, waiting for these headwinds to cease, but within that the analysts have been trimming their targets, which presents a bit of another headwind for this market that'll cap gains in the near term. Yeah, important things to pay attention to. Bottom line on Zcaler, is it a buy for you personally? >> Zcaler, I mean, I think it's a speculative buy. Uh, but it wouldn't be the one I'll be focusing on right now. This market is definitely um in the dumps where the other markets are actively moving higher. So, those are the ones that I would be more interested in. >> Well, let's get into that list that you are talking about today. Again, these are companies that ran up with the rest of the tech sector and have now pulled back enough that they are interesting buys again. And there's a lot of different tech names in the AI space especially that are exactly like this. If you want to check out a list of five big tech names to buy on this pullback that we've seen in the last week or so, scan the QR code or click the link in the description to get that free premium report right now on marketbeat.com. It's on five technology stocks that got a little cheaper this last week and are definitely worth another look. Again, we've got that link in the description if you want to check out that free article and that list of names right now on marketbeat.com. But Thomas, now we are going to focus on the list of the three cyber security names you have for us today. What's the first one on your buy list? >> Yeah, that's uh PaloAlto Networks. PaloAlto is the largest cyber security company by market cap. It's actively engaged in platformization and consolidating this fragmented market. The last I heard it had about 12 or 15% market share, which is considerably more than uh the next largest players. >> Yeah, that's a lot of market share. Let's go there first. talking about something you said about cyber security before maybe even 6 months ago and you were saying that there's so much demand in cyber security that uh there's room for everyone to win. Do you still think that's true today or is Palo Alto really far and above what other names in the space are doing? >> Still think there's room for plenty of players to win but with platformization and and unification of these systems uh the smaller players are going to be disappearing or else consolidating themselves making themselves into larger players. So, what we're going to see over time is fewer players with more services. >> All right, that's really interesting. Let's look at what Palo Alto is doing with its services and how that's resonating with their earnings report. It looks like they also had a really good quarter. >> Well, yeah, they did have a beat and raise quarter. Uh the big thing within this one was that we were expecting margin pressures tied to their platformization plan because they've had lots of incentives and freebies trying to get customers to come on board. But those things are all resulting in and outperforming revenue and revenue growth. And within that, they're still performing better than expected on the bottom line. So they're driving good profitability. They're able to sustain their capital return. And uh they're they're raising guidance. >> Raising guidance is always good. But I'm curious what exactly they're raising guidance on. Which sectors of their business are seeing the most growth right now? >> Broad-based strength in in the new systems. They're getting new clients, but also driving penetration of services. So it's really uh the same story we see across all these leaders is just these dual tailwinds for business in which they're grabbing new business but also getting new business from the new business and it's driving an acceleration forecast and we saw that in the guidance. >> Yeah. >> Holding on to the clients they do get uh is always good news for companies like this especially. Let's talk a little bit about the chart. I know you like to look at the chart and give that some analysis. Uh this one clearly that huge growth story since April, but we do see a big pullback from that initial top that it reached uh just a few weeks ago. >> Well, right. So, this chart is just like the ETF and the other charts are probably going to look just like this when we go to look at them as well. We did see a pretty um significant top reach. The market has pulled back. Uh but again, this is after a very large price runup. So, this second week of selling has found support at the 30-day moving average. We're already rebounding from that. To me, this looks like a consolidation phase and not really a correction. I would expect to see Palo Alto move sideways within like the 260 280ish range maybe for the next few weeks or two months um and then eventually move to the upside from there. Now, one thing I want to point out on this chart and I this is on all the charts as well and I'm looking at the weekly chart is that there is a very significant MACD convergence on this chart. A MACD convergence just reveals a strong and strengthening market. one that is more likely to set another new high than not. >> All right, and good look at that first stock on your list today of cyber security companies that are part of this big boom. What's the second name on this list? >> Well, the second name is CrowdStrike. This is another company that's uh really um embedded with the platform process. It's a cloudnative cyber security company and it's really focused on endpoints and IDs and and and workloads. um it's viewed as a base layer uh for your cyber security uh plan and would be part of of a more comprehensive plan that might include some other some other companies. >> Yeah, like you said that these charts are going to look similar and Crowd Strike's chart looks much like Palo Alto's chart right now. Why do we see these two so closely tied together and really mirroring each other? >> Well, just because they're both leaders in the market. Uh they're both uh comparable companies uh competitors um unlikely really to impact each other's business given the playing field. Uh they're both performing very well and growing and accelerating their their business. So that's why we see the stock the stock prices advancing. >> Is there anything different about this chart that you want to point out from what you just shared about PaloAlto? >> Uh the biggest difference is that Crowd Strike has a stock split coming up later this month. Uh that could induce some volatility in the market. won't really change any fundamentals, but it will give some investors um more shares to hold and for some reason that makes them want to sell. Uh so following stock splits, we might see an extended period of consolidation or maybe a deeper pullback than the other members of the sector of the group. But generally speaking, this is still a very bullish chart uh with upside expected ahead. >> Let's back up and talk a little bit about why Crown Strike decided to do this stock split. >> Stock splits generally come because the prices are getting high. Uh this stock hit $700. It was definitely around the $500 range, moving up towards that that area when they made the decision. The intention really is to make the stock more accessible to for market participants, especially their own employees. U many companies have um stock purchase plans. Uh so when the stock price gets up really high, employees have a hard time buying it. You know, if you're getting paid only, you know, a thousand, couple thousand bucks every paycheck, you can't drop half of it on on a stock. So giving that stock split helps uh increase accessibility and and and market ownership. And we'll probably see that happen with this one. Once it splits and the stock price gets lower, um institutions might start scooping up shares more. Uh but certainly we'll see some more retail interest. >> All right, that's a really interesting point about Crowd Strike. Another question for you on comparing these first two that you just talked about. One thing I hear from plenty of viewers is how many stocks can I buy? You guys recommend buy lists all the time. Should I be buying absolutely all of these? And so when it comes to these two names, do you pick one uh which one you like better or is it good to have a little variety in this entire cyber security sector? >> Well, right, you're probably going to want to pick one over the other cuz an investment in both is as good as an investment in one. The stock prices are tracking with each other. And in doing so, you would just expose your risk. Now, if you did want to have both stocks, you're going to want to look at this from a portfolio basis. So for your portfolio, depending on who's managing it, yourself or someone else, you might only have eight stocks or 10 stocks or 12 stocks. So if you want these two stocks to represent one of your positions, then you might buy a 50% size of each of them. So if you're going to have a portfolio with 10 positions, 10% each, then these two stocks might be 5% each for one 10% position in cyber security. >> Yeah, that's interesting. Another way to look at it, if you can't pick between the the three names we're mentioning today, remember that ETF is an option. We mentioned it early on because I think it's one way some investors prefer looking at a sector like this that's moving together so closely. I do think that stock split part about Crowd Strike is an interesting and important thing for investors to keep in mind. Before we move on to the last name on the list, I want to talk a little bit more about a fundamental growth story for CrowdStrike and for all three of the names we're talking about today, and that's the connection to AI. You mentioned some of the products for CrowdStrike that are really popular when you first started talking about this one. Let's talk about that connection to AI at all. And as we see more businesses and more companies implementing AI agents into their systems, I feel like that goes handinhand with what cyber security needs are for these companies too. >> Well, right. So, agentic AI means automation. Automation means the computer doing lots of stuff behind your back behind the scenes. So that's increasing the amount of internet traffic and network traffic exponentially which just means an exponentially increased need for cyber security and that's just totally playing into the the revenue growth outlook and the stock price outlook. >> Yeah, cyber security and AI are absolutely handinand but the other area that everyone is talking about right now is that space egg story and all the whole space economy that's growing right now. We know the IPO comes out tomorrow. Everybody's been talking about it. Some people are are tired of talking about it, but I'm also curious about the potential cyber security sector tie-in with what's happening in the space economy. >> Well, cyber security is absolutely vital for SpaceX and the space economy just because of the amount of money and technology that's being involved. They're also trying to move data centers into space. So, we're going to need security up there for that. Uh I think that SpaceX is going to unleash a new age of space investment which by extension will unleash a new age or a new growth driver for for cyber security stocks. >> I think it's just interesting to talk about the different potential catalyst for the cyber security sector. And I also think it's interesting that all of these stocks pulled back so much in March and April when people were making the argument that the growth in AI uh would hurt cyber security. But I I feel like what's happened in these stocks makes far more sense that the growth of AI and cyber security have to go handinand that the two go together and it's actually more of a catalyst for these companies rather than a deterrent. So uh two potential catalyst there is the continued growth in AI and even the growth in AI in space and that space economy too. So thanks for addressing those. If you are interested in looking at some of those AI stocks that are continuing to expand and getting all this growth, check out this special report from Thomas. If you haven't looked at it yet, this is Thomas's premium report on marketbeat.com All Access. It's the 10 best AI stocks that he is looking at in 2026. Again, if you haven't checked out that list, make sure to scan the QR code or click the link in the description. It's a free report for all of our YouTube viewers to take a look at right now. All right, Thomas, let's get to this last name that you want to talk about. The first two very popular names in the cyber security space. This last one is familiar to many investors, but it's not quite as popular as the first two. >> Yeah, that's uh Data Dog. It's uh a smaller company, but also very important to AI. It's kind of emerged as a critical like ground level picks and shovels play on cyber security uh because it's focused on observability. It's handling a lot of your cloud and a lot of your models and a lot of your agentic activity. Watching how they operate, looking for flaws proactively instead of waiting for errors to start to show up on their own. Again, their business is accelerating sequentially and year-over-year. Um, they're monetizing new products. Recently, their product launches have kind of elevated them from um like an add-on to being an ecosystem on their own. So again, they're consolidating and and growing in this fragmented market. Uh trying to monetize and capitalize on on platformization and ecosystem security versus just niche security. Within all that, the analysts are lifting targets and leading this market to new all-time highs. >> All right, this one's an interesting one, very closely tied to that AI story. One thing you mentioned earlier is that there's so much competition in this space that there is the potential for some of these names to potentially go away or have to scale in order to continue to compete in a very crowded field even though there is lots of demand because Data Dog is smaller and on the newer side. Do you think it has what it takes to compete and continue to scale its business to really compete in the whole cyber security sector? >> Oh, I think Data Dog's pretty entrenched now. It's got more than 50% of the Fortune 500 as clients. It is, as I said, a foundational layer to the AI software stack. It's become pretty entrenched. I think that Data Dog is on track for continued growth and acceleration this year and next year for sure. >> Is it even more entrenched in AI than the first two names that you mentioned? I mean obviously Palo Alto and Crowdstrike are these huge names in cyber security but is data dog maybe more niche in that AI support uh for cyber security that it has even more growth potential in that specific sector. >> It is a little bit more niche uh but it is aligning with the theme of platformization and unification because it is launching those new products. It is enhancing its services and and building out those services. It's on the same track as the other two companies. >> Yeah. So is its chart. Let's take a look at that really quick. Very similar growth story here. anything new or different that you want to point out in Data Dog's chart compared to the first two? >> It looks the same. It's a strong rally. We're up 100% from the lows earlier this year. We did hit a top. That top might be the peak for the foreseeable future. But with the MACD convergence in play, I would fully expect to see this market consolidate, move sideways, and then eventually continue its trend and set new all-time highs uh potentially before years end. Now, the one thing we haven't talked about yet with the the three names that that you're recommending that all have these very similar charts, is that they also have similar uh issues with analyst price predictions, all three of them are sitting almost right at that consensus, meaning right now anyway, it doesn't appear to have much upside for the investor. Do you expect that to change anytime soon? >> Well, the reason the prices um accelerated the way that they did from the April lows is because the analysts started lifting their price targets again. So right now what we have are markets that are rising into the consensus. The consensus assumes fair value here and as of mid June the trends are leading to fresh all-time highs to the high end of the range which would be all-time highs for all these stocks. >> All right. Well, all three very strong growth stories. If you're looking for other strong growth stories, especially in the tech space, make sure to take a look at this video. It outlines some of the strongest stocks in that tech market right now and a couple that aren't so strong that you might want to avoid. You can watch that full video