How Public Cybersecurity Companies Performed in 1H 2021

A good way to monitor the overall health of the IT security industry is to track the publicly traded companies in the space. I previously reported on the performance of 20 cybersecurity companies in 2020. This is an update on those 20 companies with the addition of newly minted SentinelOne, trading on NASDAQ with the symbol S.

Without the additional $10.15 billion from SentinelOne, these 20 companies increased in valuation 13% to $265.62 billion total.

It was not that long ago that no cybersecurity company had a market cap over $25 billion. Now there are five.

Public companies	Symbol	July 1 Market Cap	1H 2021 Change	HC July 1, 2021	HC % change
Crowdstrike	CRWD	56.72	26% Sponsorships Available Sponsorships Available Sponsorships Available	3,781	29%
Fortinet	FTNT	39.58	67%	8,712	10%
Okta	OKTA	36.85	14%	4,314	23%
Palo Alto Networks	PANW	36.10	-5%	10,435	17%
Zscaler	ZS	29.26	11%	3,152	26%
Check Point Software	CHKP	15.79	-13%	5,958	3%
SentinelOne	S	10.15	NA	945	43%
Proofpoint	PFPT	10.00	31%	3,706	3%
Trend Micro	4704.T	7.19	-5%	6,909	3%
Rapid7	RPD	5.29	15%	2,121	9%
Cyberark	CYBR	5.23	-14%	1,990	16%
FireEye	FEYE	4.81	-4%	3,108	2%
Sailpoint	SAIL	4.74	-9%	1,666	17%
Tenable	TENB	4.30	-20%	1,589	12%
Qualys	QLYS	3.95	-16%	1,613	12%
Mimecast	MIME	3.47	1%	1,797	-4%
F-Secure	FSC1V.HE	0.77	-13%	2,384	-6%
Absolute Software	ABST	0.72	11%	631	6%
Zix	ZIXI	0.41	-13%	411	3%
Tufin	TUFN	0.34	-25%	524	-1%
Cyren	CRYN	0.06	-12%	234	-6%
Clavister	CLAV.ST	0.05	15%	138	0%
Totals		265.62	13%

Observations

Crowdstrike was still the largest cybersecurity company by market cap with a valuation of $56.72 billion. Its stock appreciated 26% in the first half of 2021. Headcount grew slightly faster at 29% to 3,781 people, indicating management expects revenue to keep growing.

Fortinet (FTNT) grew the most in the first half of the year. Its market cap went up 67% to $39.58 billion on July 1. This remarkable growth led to Fortinet’s market cap passing its main rival, Palo Alto Networks (PANW). Always keep in mind that stock market fluctuations are a mystery (at least to me) and data points captured on January 6 and again on July 1 may not tell the whole story, but these graphs are pretty good. FTNT on the left and PANW on the right.

Okta became the third-largest cybersecurity company by market cap, rising 14% to $36.85 billion. Its headcount increased 23% to 4,314.

Palo Alto Networks grew its headcount by 17% to 10,435 while its market cap dropped 5%.

Zscaler, which topped the growth charts in 2020, only grew 11% in market cap in the first half of 2021. Yet, its headcount continues to grow at a 26% pace.

At $15.76 billion, Check Point Software, the firewall stalwart on the list, lost 13% in valuation. Its headcount only grew 3% in the first half. There is a strong correlation between headcount growth and company revenue growth that typically converts into stock price growth. Check Point is relatively stagnant, yet it reports growing revenue and <gasp> profits.

SentinelOne made its debut at $10.15 billion, an all-time record for any cybersecurity IPO. Its headcount grew 43% to 945 people.

Cybersecurity Market Cap per Headcount

I often look at valuation per person when a company is acquired. This is a telling measure for service providers and consulting firms. Technology companies usually get much higher valuations because revenue/employee should eventually scale up.

Dividing each company’s market cap by the headcount number shows us that, at $15 million per employee, Crowdstrike scores the highest. Is this an indicator that Crowdstrike is overvalued compared to the others?

SentinelOne, with only 945 people, is the second most highly valued at $10.7 million per person. Does that mean that at its current hiring rate of 86% annually it will reach 1,757 people in 12 more months and achieve a market cap of $18.8 billion?

Fortinet, with headcount of 8,712, is more than twice the size of Crowdstrike, yet has almost a third of the market cap even after its 67% growth in the first half.

With a headcount of 10,000+, Palo Alto Networks is the largest pure-play cybersecurity company. It is valued at $3.5 million per person.

Where, you may ask, is Cisco in all of this? Sadly, we have no visibility into what percent of Cisco’s 92,000 people work in the security products group, so the company is somewhat opaque to analysis.

Summary

The first half of 2021 was good for most of the big public cybersecurity companies. Valuations are growing at an annualized rate of 26%. Many of the smaller companies dragged this down. From anecdotal reports, most private companies are seeing an increase in valuation, too. The astounding first outside investment of $543 million for Transmit Security is just confirmation that venture investors agree.

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