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The Outlook Is Bright For Security Software. Here’s How Goldman Would Play It.

Coverage of Palo Alto Networks was launched with a Buy rating by Goldman Sachs analyst Gabriela Borges.

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The outlook looks strong for the security software sector despite near-term macro headwinds, Goldman Sachs analyst Gabriela Borges asserted Tuesday in a 90-page research report picking up coverage of the group.

“We see several industry dynamics that are favorable for long-term investors,” she writes in the report.

Among other things, she asserts that the industry has shifted to multi-product portfolios, reducing a historic tendency toward boom-and-bust product cycles. And she says the industry’s cyclicality is tempered by a shift away from hardware and toward software-as-a-service.

She also sees natural extensions for the industry’s incumbents, including edge and cloud security products. And Borges sees the industry benefiting from growing adoption of machine learning applications.

Borges cautions that in the near-term those positives will be partially offset by a more muted demand environment this year than in 2022, reflecting pressure from macroeconomic factors.

The analyst picked up coverage of nine stocks. She launched
(ticker: CRWD),
Check Point Software
(FTNT), and
Palo Alto Networks
(PANW) with Buy ratings. Borges started
(S), and
(ZS) with Neutral ratings. And she set Sell ratings on both
(NET) and

Here is a brief rundown on her calls on the stocks.

CrowdStrike: While noting that the company’s growth is moderating, she thinks the risk-reward looks favorable, with steady growth in endpoint security and outsize growth in cloud security software. Her target price is $141.

Check Point: The analyst says the company’s market share losses in the firewall sector are moderating—and Check Point is having success cross-selling cloud security products to its installed base. Target: $148.

Fortinet: Borges says the company’s thesis that networking is converging with security is playing out in the trend known as SASE, an acronym for secure access service edge, shifting corporate defenses to the edge of the network. She sees plenty of runway for growth. Target price: $73.

Palo Alto Networks: The company “is furthest along in the industry with executing a multiplatform strategy with technology leadership across several product vectors,” she writes. The analyst sees durable annual growth of 20% for the next five years. Her price target is $205.

AvePoint: Borges notes that AvePoint provides data protection and governance controls for cloud-delivered workspaces from

and Google. The analyst sees margin benefits from a shift to a subscription-based model, but sees risks from slowing of the digital transformation trend. Target: $5.50.

SentinelOne: She expects the stock to be range bound with market share gains offset by a softer macro outlook. Target: $17.

Zscaler: Borges sees the company as a technology leader in secure service edge applications, but also increasing competition ahead. Target: $148.

Cloudflare: While Borges writes that Cloudflare is one of the most innovative companies in the sector, she also thinks that growth will slow from here, and that risk/reward is skewed negative for the stock. Her target price is $51.

Okta: She expects slowing market share gains for Okta, as competition in the identity access management sector increases, in particular from Microsoft. Her target price: $70.

Most of those stocks were trading modestly higher on Tuesday, although Check Point was off 2% and AvePoint was down 3%.

Write to Eric J. Savitz at


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