Cybersecurity is a great AI play, but some valuations are getting absolutely ridiculous, and great companies are not great stocks at any price. CrowdStrike trades at 186x forward earnings and 40x sales, Cloudflare at 209x and 43x, Palo Alto Networks at 87x and 21x, and Rubrik at 327x and 11.5x. x.com 

Tenable looks cheap among cybersecurity software names, trading at a lower P/E than Palo Alto Networks and CrowdStrike, a lower forward P/E than Fortinet, and one of the group's lowest PEG ratios. Its chart shows a double breakout from a triangle and range highs, with low cycles and confirming on-balance volume. x.com 

CrowdStrike may distinguish itself from an expensive cybersecurity group by showing more breakneck growth at earnings next month. Fortinet's slowing product revenue exposed how much relentless execution investors had priced into the group's extreme multiples, pulling CrowdStrike down in sympathy. CrowdStrike remains in a higher tier than Fortinet, which itself ranks above SentinelOne. x.com  x.com 

Cybersecurity is the real bubble right now, because greater importance in the age of AI does not justify paying valuations like 40x sales for names such as Cloudflare, CrowdStrike and Palo Alto Networks. x.com 

Combining estimated NTM revenue growth with trailing GAAP EBITDA margin makes Palo Alto Networks, Datadog, JFrog, Rubrik and Snowflake look overvalued against forward EV/sales. Zoom, Alphabet, Oracle, AppLovin, Microsoft, Fair Isaac, Adobe, Amazon and Teradata remain undervalued on this Rule of 40 comparison; Palantir, Cloudflare and CrowdStrike remain overvalued. x.com 

Zscaler looks like the better cybersecurity buy for the next three years because its valuation has diverged sharply from CrowdStrike's. Zscaler trades at 5.7x next-twelve-month revenue with 17-18% expected annual growth, versus CrowdStrike at 31.1x revenue and 150x earnings with 21-22% growth, probably the biggest gap ever between them. A 25% CAGR over 3-5 years is hard to model for CrowdStrike at that price. Zscaler has been beaten up for good reasons. x.com  x.com 

Hyperscaler cloud integration and frontier AI labs could take a fair bit of cybersecurity's economics. Rising AI-token budgets also make higher cyber spending a stretch. Palo Alto Networks, CrowdStrike and Cloudflare have nearly $1 trillion in market cap on less than $20 billion in revenue; even high-quality Palo Alto and Cloudflare look too expensive, while Okta looks indefensibly expensive. The theme has real demand, but these valuations look too high in the short to medium term. x.com 

CrowdStrike and Palo Alto Networks need 50%-plus growth to deliver even a 10% IRR over a realistic horizon, but almost no conceivable case gets them there. They feel as dumb as Zoom and Peloton in 2021. Even if revenue doubles over four to five years, Palo Alto would still trade at 10x revenue and CrowdStrike at 20x, leaving little prospect of a real IRR; Palo Alto is growing in the teens today. x.com  x.com  x.com 

AI is turning security spending from optional to essential, and beats from CrowdStrike and Okta confirm it. CrowdStrike's Q2 revenue rose 26% with record net new ARR of $333M, up 51%, and raised guidance; Okta's RPO reached $4.86B, up 17%, with a second guidance raise this year, after Fortinet also raised. AI agents and coding widen attack surfaces, Morgan Stanley estimates up to $220B of added security demand, and buyers are consolidating onto platforms. x.com  x.com 

SentinelOne appears undervalued relative to its expected revenue growth. Analysts forecast 19.2% NTM revenue growth, versus 23.2% for CrowdStrike, which trades at a premium on forward EV/sales. x.com