# 3 Cybersecurity Stocks to Invest In as AI Reshapes Industries

## Метаданные

- **Канал:** Morningstar, Inc.
- **YouTube:** https://www.youtube.com/watch?v=ktFB72MgL8w

## Содержание

### [0:00](https://www.youtube.com/watch?v=ktFB72MgL8w) Segment 1 (00:00 - 05:00)

Hey. Hi, I'm Dave Sakara and welcome to a bonus episode of the Morning Filter podcast. Now, as regular viewers and listeners know, we've been trying several different bonus episodes of our podcast, sitting down with various experts from Morning Star to discuss different topics that you told us that you want to hear more about. If you have an idea for other bonus episodes, please send it to us at our email address, the morning filter at morningstar. com. Now, longtime listeners of the morning filter have heard me mention numerous times over the past several years why I really like the attributes of investing in the cyber security industry. So, on today's bonus episode, I have with me Ahmed Khan, Morning Star's senior equity analyst and a technology team who covers the cyber security industry for us. Ahmed, thank you for joining us today. — Great to be here, Dave. Thank you. Now I think most people are pretty familiar with cyber security overall in thinking about it really as a broad term. I think most people are certainly familiar with their own anti virus and firewalls on their home PCs. But I also think cyber security is just one of those terms that encompasses a lot more than I think people may necessarily realize. So I was actually hoping if you could start us off here with a brief overview of what is cyber security and what all does cyber security entail. For sure. So I think when people think about cyber security, their core intuition is is right. There's bad guys and then there's good guys who are defending against the bad guys. So an antivirus for example is is protecting your computer against from against the bad viruses. Um once we take that sort of like take that same sort of theoretical standpoint and apply it across an enterprise what we see is three key buckets or or areas of spending emerge in in cyber security. One is services. So that's like people spending. So you're spending on actual talent. Then you have software which is pretty you know self-explanatory. You're spending on security software. You have hardware. This is primarily hardware firewalls uh security networking equipment. Uh so these are the three main key buckets when we're thinking about the broader security market and how spending is allocated. Uh and all these buckets are you know are again serving the same goal which you know we intuitively understand cyber security to do which is uh uh protecting your enterprise your organization your local school hospital whatever it is uh from uh from nefarious actors trying to get um access uh to your data to your organizations. Now when I think about cyber security and think about all the different types of segments that are in there you know whether that's endpoint identity cloud security networking and the other segments you are there certain segments out there that you find are growing faster than others and if so what is driving that? So first of all, you know, going back to, you know, services, software and and and hardware. Services and hardware are are not growing as fast. The most of the growth that we've seen is coming actually from software spending. And software spending actually encompasses some of the segments that you mentioned, right? So some of the very high growth segments have been endpoint, cloud, identity, uh parts of network security that are more software focused and all these things. all these sort of u uh um you know subsegments may seem a bit abstract but they're actually like they're pretty um accessible for regular investors to understand. So for example endpoint you can think of it as just an updated version of an antivirus. So protecting your endpoint which would be a computer or or or your tablet or your device. Identity obviously is just protecting you think of it as a badge swipe when you're entering an office building to verify your identity and so forth. Um but you know to answer your question softwarebased cyber security uh segments have actually outgrown uh uh the hardware and services uh segments and we expect that trend to continue. — Okay. Now I'm thinking about cyber security and of course you know it's vitally important to you know any organization whether it's you know corporate or public. I'm just curious you know what have you seen among like really the underlying fundamental trends over the past couple years and what are your expectations you know towards those trends over the next few years. So first of all uh as soon as like you know obviously when COVID happened I think that was a regime change in both in

### [5:00](https://www.youtube.com/watch?v=ktFB72MgL8w&t=300s) Segment 2 (05:00 - 10:00)

terms of uh um the intensity and the frequency of cyber attacks. So f the FBI actually collects this data and you can go back you know in into the early 2000s and you can see cyber crime a clear inflection point in the during the covid pandemic when people basically you know there was everyone is online but the security sort of apparatus hadn't properly adjusted and now we're seeing a further regime change due to AI. So, you know, I'm sure you're getting them and I'm getting them like emails that don't look that suspicious anymore, but still are fishing emails, etc., that are just generated uh with AI and you can do that uh on MOS. Uh so that has been one sort of like key differentiator or key sort of trend that we've seen in the cyber security segment rising frequency and intensity of cyber attacks. Uh the second uh uh sort of uh thing to keep in mind is that the actual dollar loss per breach has actually increased. So the Ponyon Institute does this uh you know collects this data where they look at the cost of a cyber breach again longitudinally over a period of time and that is it continues to inflect upward which means that if you're a company now you have the reputational risk of getting breached but you also have a real financial risk that is like you're going to have like financial impacts uh both first order and second order financial impacts from that breach. So those are sort of some of the key drivers that continue to make cyber security uh that important for organizations. — Now I do want to get to like some individual stock picks at the end of the podcast but before we even get there just thinking about the cyber security industry you know overall how would you know really give us a synopsis of what is kind of the general investment thesis you know overall as far as like where you see these trends going in the future. — For sure. So first of all you know um the broader thesis that we have in cyber and this will really show when we sort of discuss the individual stock picks is one about vendor consolidation. So right now cyber is an incredibly fragmented market. We expect that over time will consolidate and you will have like large vendors that will be able to increase their market share and dominance and be able to uh create platforms that are multimodule sort of across various end markets and create and capture market share. Um now within sort of like looking at the contours of that growth though there are certain drivers right so you have increased digitization which obviously was catalyzed or further accelerated by by co obviously is you're getting another lack of growth uh with AI you have compliance related sort of drivers you know such as like you know in increased SEC regulations increased European regulations that force companies to spend more on cyber. Um so you have I mean structurally the industry is is is primed for strong growth uh because of like you know because of secular tailwinds whether it's like things such as like you know increased digit digitization or or or shift to cloud um or some of the compliance related uh factors that I mentioned as well. You know, you mentioned a little bit and touched on you artificial intelligence and the longer term impact there. And what I've seen across, you know, the market in general and the software space in particular is a lot of those software stocks really been under intense pressure over the past year, if not longer. You know, some of those stocks falling 20, 30, you know, even 40%. just because so many investors are concerned that artificial intelligence either could disrupt or in some cases you even completely displace you know the businesses and products of these software companies. So as an investor you know how would you recommend how should they think about the difference between investing in more of those software as a service stocks versus cyber security stocks. So first of all um it's important to understand that cyber has never been like purely software and you know at the top I mentioned services and hardware which are not really like you know impacted uh or not are not clear you know like they're not software driven uh per se. The second thing I would mention is that especially when we're thinking about the effect or the impact of AI on on cyber and then juxtaposing that or comparing that with software. One key differentiator is that there is an adversarial dynamic when we're thinking about uh AI and cyber security. So a good example of this would be let's say you have an large language model that makes detection of threats 5x better. Now that by definition also means that an attacker can use the same model and actually detect vulnerabilities 5x faster 5x you know in in a more efficient way. So what I guess what I'm trying to say is that since AI is dual use for both the adversaries and the

### [10:00](https://www.youtube.com/watch?v=ktFB72MgL8w&t=600s) Segment 3 (10:00 - 15:00)

defenders it actually means that the overall cyber spending uh has to has to elevate which is not a dynamic that you see in other parts of software. Right? So this is unique to cyber security. Second thing I would say is that AI is creating net new markets. So you know AI runtime security uh there's like securing actual AI use cases or you know actual uh uh AI deployments. Then there's new firewall spending that's going to happen in data centers. So there's a lot of like net new spending in cyber security that companies under our coverage are going to benefit from and that may be harder to sort of pin down when it comes to the broader software universe right where you see more headwinds than tailwinds which is not the case when we're thinking specifically about uh cyber security. — Yeah. And so with artificial intelligence, you know, as an investor looking in the cyber security space and investing here, you know, just thinking about maybe the even like the next 12, 18, you know, 24 months, you know, are there certain things that you're watching, you know, that you think that they're going to evolve in a certain direction? And if so, you know, do you think that there's going to be certain cyber security companies that are going to be better positioned, you know, for those evolving needs here in kind of the medium term? — For sure. No. So, so Dave, uh, what we have is we have essentially an AI quality scale which judge which sort of ranks cyber security companies on a variety of different factors related to AI. That could be product monetization, uh, uh, the number of enterprise customers they have, the kind and richness of data the company's actually aggregating and then running their AI models on. So it has a bunch of different factors and and that sort of like you know AI quality scale if once we apply that to our coverage um the larger players so that would be crowd strike Paulo fortnet and zcaler really come to the four or rise to the top um and I think that's the story that we see formulating when it comes to AI so you know I mentioned earlier we've seen vendor consolidation people want to spend more with less we think AI is going to come and turbocharge that dynamic. So, you know, if you're Paulo and historically you've gone on acquisition sprees to buy, you know, specific modules, well, now AI actually increases your product velocity. So, you can actually see a product and say, "Hey, this is a good product that a competitor may have and you can build that inhouse and in a much faster pace than you were able to in the past, which lets you sort of gain market share uh uh much faster. So you know when it comes to AI in particular we expect that there's it's going to be a tale of two sort of tale of two cities here. So one city is going to be the the platform vendors which you know beneficiaries of AI but even in our coverage um we have companies that we think are going to be lagards or lose market share. So these are the smaller players like Rapid 7, Teneal uh uh etc. Which also then kind of brings us to our next topic. And you know when I think about you know investing and I think about how Morning Star looks and value stocks. You know one of the key differentiators in my mind is kind of that explicit incorporation of the economic mode concept you know into our valuations. Thinking about companies that have you know long-term durable competitive advantages and how that helps companies be able to generate excess returns on invested capital over the weighted average cost of capital over the long term. And so I was hoping maybe you could kind of walk us through here for the cyber security industry, maybe even using a couple of the different moat sources as you know specific examples, but you know what attributes are really required to be able to dig that economic moat here in the cyber security industry and anywhere you could give us you know some specific examples would be much appreciated. — For sure. So across our cyber security coverage when we see economic modes the primary mode source is switching costs. So that is the actual sort of tangible costs or intangible costs that a customer has to incur if they want to rip and replace a vendor. The clearest sort of evidence of of switching costs by the way you can find this in retention rates. So a lot of cyber security companies and software companies by the way will give you uh retention rates and that could be a dollar-based retention rate or a logo based retention rate. It just tells you how many customers they're keeping or how many dollars those customers they're spending, how many dollars they're keeping year-on-year. When we're looking at cyber multi companies tend to have a retention rate roughly of 95ish% on average which would imply a customer lifetime of around 20 years which is well in excess of you know the 10 year when we when we're thinking about economic modes we're thinking about whether the company will be is more than likely to sustain a competitive advantage over a 10 to 20 year uh uh time horizon. So certainly you know that passes uh the retention rates pass that check and that it really shows the switching costs that are

### [15:00](https://www.youtube.com/watch?v=ktFB72MgL8w&t=900s) Segment 4 (15:00 - 20:00)

there in cyber right. So I mean if you're if you're a technology buyer the reason you buy cyber security is to take uncertainty off the table and now if you want to switch cyber security vendors you're actually taking the uncertainty and putting it right back on the table. So it's not really like I mean based on our conversations with actual operators it's really unlikely that you take an operating well functioning cyber system and cyber source platform and you rip and replace because somebody gave you like a 10 20 30% discount. Um so that's number one. Uh number two is network effects. So not all so all cyber security modes have switching costs. Not network effects. Network effects primarily stem from what is the richness and the quality of the data the company's aggregating from all of its different customers and how is able to operationalize that data to improve security outcomes. So the cleanest example of this in our coverage is crowdstrike. So if you for example are a crowdstrike customer, you will download uh the crowd strikes agent on your laptop, right? If let's say your laptop gets breached or there's a there's an attack on your laptop, CrowdStrike is able to detect that attack hopefully mitigate it on your laptop but at the same time essentially update all the laptops that are connected on Crowdstrike simultaneously to ensure that none of them can get attacked by the same attack sort of uh vector that was used uh in in in you know the the hack that was being conducted on your laptop, right? So, this network effect where uh um adding more customers actually leads to better security outcomes for customers that are already existing on crowd strikes platform is super powerful and we see this uh in other instances as well. So, with zcaler and with cloudflare and with Paulo uh we see network effects there as well and the story is very similar. More data means better solutions. Better solutions mean more customers, more customers means more data and you have this vicious cycle or virtuous cycle uh uh that goes on — and be you know out of curiosity too thinking about the network effect there and its impact is that also part of the reason why you expect to see just more and more consolidation in the sector as well. — Yes. Yes. Because like I mean again right like if a crowd strike the access that they have with trillions of signals daily that they're monitoring and you take that and you compare that with an upstart that may have a percent of that a fraction of that. So the just the advantage that the incumbents have and then they can build on that advantage using AI we certainly see the the gulf widening between uh the platform vendors and everyone else. — Okay. Well, let's just dial it back here to talking about our valuations a little bit more. Now, when I think about what is a stock worth, it is of course, you know, the present value of all the future free cash flow that the company is going to generate. And so, to do valuation, we have a standardized discounted cash flow model that we use. Now when I'm thinking about that model, you know, you can look at what the guidance might be for the next quarter or even for the next year for some companies, but I'm thinking about like forecasting in the out years, you know, forecasted year three, four and five or even, you know, longer than that. I'm curious, could you walk us through like what is your thought process as far as, you know, how you make those kind of projections, you know, over the longer term and incorporate that into our valuation model? — For sure. So what I like doing is I like using a mixture of of a top down approach and a bottoms up approach. So a top down approach would basically be looking at some of the key spending uh categories within cyber security looking at you know which uh where the growth is inflecting for those spending segments. So those will be the segments that we discussed uh at the top of our discussion you know cloud endpoint where do we see growth and then also layering in which vendors we think will benefit right so if I'm discussing endpoint I think crowdstrike is going to gain market share so that tells me that okay crowdstrike should be outgrowing the sort of overall endpoint market right so that tells you something about what crowd strike's growth profile would be at the so that's top down uh now bottoms uh then you sort of look at uh um you know you try to size the market uh you're looking at you know average sales prices or ASPs uh number of number of customers average revenue per customer how we think that's going to inflect um so there there's a bit of both that happens especially you're absolutely right like you know quarterly visibility is pretty good you could make the argument that annual visibility is pretty good but when it comes to year three and onward it gets more

### [20:00](https://www.youtube.com/watch?v=ktFB72MgL8w&t=1200s) Segment 5 (20:00 - 25:00)

challenging. One thing I will say is that whenever we have a forecast of you know the overall market right so again going back to the top down approach you'll notice that if you look at our forecast from 2019 and comparing compare it with 20 2024 or 2020 with 2025 there's a big gap and we always end up underestimating the size of the cyber security market and that's not hopefully because like you know we're not doing a good job or other analysts are sizing the overall space it's more structure structural because like there's new areas of cyber security spending that just come up. So if somebody told you in 2019 that oh cloud security is going to be a multi-billion dollar sub subsegment you would be like oh okay it could but probably not cuz that requires that segment to grow at a 90% keer for the next 5 years like no one was modeling that but it happened and right now we're seeing the same thing with AI so a lot of new AI spending AI security spending if we sort of think about our forecasts 5 years from now there we have to build some optional value for all this spending that we can't see right now. Uh which makes our job uh that much more fun and challenging. Uh but yeah, just to give you some perspective on on how we think about growth uh for some of these companies. — Yeah. And to some degree, I think that also is going to be encapsulated in our uncertainty rating where we're trying to model out kind of that cone of variability. But it almost sounds to me like you're saying that if I had to think about the risk here, it's probably going to be more risk to the upside that that's actually going to be, you know, larger and more spending over the longer term than we may even necessarily be conceptualizing at this point. — Yeah, for sure. — Yeah. Now, actually, I kind of want to turn the tables here. You I got a lot of questions in from our viewers, you know, on the cyber security industry. And I think probably the most common one I get are, you know, what are the key differentiators, you know, among the companies under our coverage. You know, thinking about like maybe the big four, you know, if you could kind of walk me through what you think those key differentiators are and then if there's like maybe some of the smaller ones that you think are interesting as well. — For sure. So again, as I said, uh the way we envision the cyber space is you're going to see the big get bigger and the small vendors get squeezed. So you know the big vendors that I'm talking about are Paulo, Crowdstrike, Fortnet and Zcaler in that order. Um what these companies what differentiates these companies is that these companies have understood that we live in a different reality than we did in 5 years ago. So now companies actually want to buy more from less vendors which means that there you can actually have uh multi if you can have multi-dommain solutions you can actually go ahead and go to market with those solutions and be able to uh be able to gain traction customer traction across multiple end markets which is what we've been seeing crowdstrike do Paulo do for Fortnite and zcaler are also sort of moving in that direction as well um now on the other side you have vendors that are stuck um in smaller segments but also in just singular segments and we think those those vendors are going to struggle. Um now obviously we cover some of them but also I mean if you think about the overall shape of the cyber security industry it's very much like a hockey stick. So you have some large vendors at the front of the stick, but then you have a litany of smaller vendors uh most of them privately held uh that are just focusing on one module within one platform. And I think over time uh those vendors are are going to get squeezed. — All right. when actually that's a great segue to get into, you know, the part of the show that everybody loves the most and that is, you know, going through our individual stock picks and you've bought three stock picks, uh, each of them with an economic moat for us today. So, that first pick is Palo Alto. So, I was wondering, you know, if you could just walk us through overall what the investment thesis is, what your outlook is, and then where that stock is, you know, trading compared to your fair value today. — For sure. So um the stock roughly has more than 30% upside. Um you know our fair value is $225. The key investment thesis on Paulo if you want to invest in Paulo you're basically underwriting our vendor consolidation thesis. If you believe in our vendor consolidation thesis that the large will get larger and Paulo will be able to gain market share across a variety of end markets whether it's identity security operations cloud etc. I think Paulo is definitely the way to go to play cyber security or to invest in cyber security. Um clearly the company is seeing traction across those end markets. So we're not it's not like uh you know we're we're speculating something that we don't see the data points and the trends for right now. uh we think again speaking about uh our investment thesis on Paulo we think that AI is going to be a general sort of tailwind for cyber

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but it's going to uniquely benefit uh companies that actually have the scale to benefit from AI and have the you know the engineering talent the data etc to actually take those they take those products to market uh we're seeing this already come in into Paulo's uh annual recurring revenue uh Uh so so we're pretty excited uh for what the future holds for Paulo. We think the market is right now uh slightly worried about the company's recent acquisition of Cyber Arc which was roughly 20-ish billion dollars. So that's a big bite. A and investors are worried about uh execution risk when it comes to Cyber Arc. Uh we think the company's track record of actually you know going ahead acquiring companies uh and being able to integrate them into their overall business is pretty solid. Um they've conducted more than dozen acquisitions over the last seven eight years, spent billions of dollars and and and hands down they've been great allocators of capital and we think that they're going to be able to sort of uh get the cyber acquisition and the identity platform at large uh uh worked out. And out of curiosity, thinking about that acquisition in your model, do you have, you know, different types of topline revenue synergies once they acquire that company, kind of incorporate it into their own business? And then same thing, are there going to be different operating margin assumptions where you've, you know, been able to capture, you know, some synergies from the cost side as well? — Yeah. So, uh, definitely from the cost side, you know, you're going to have, um, the company has already talked about what that would what that would look like. We think the forecast that the management has put out was for the free cash flow uh projections that they have is pretty is pretty reasonable. Um, on the top line, I think it's there there's a ton more upside because like identity is at an inflection point as we think about agentic and what that would mean for agentic identities to actually come in and you will need some security apparatus around agents and we think that cyber arcs uh non-human identity or NHI uh security apparatus is pretty solid and then you have Paulo which has essentially all of the large enterprises in their rolodex. So they can actually go ahead and pitch cyber arcs identity solution to these companies that are already adopting agents. Uh so I think that sort of combination is pretty attractive and that should lead to strong topline growth and I think that was the industrial logic uh behind the acquisition in the first place. — Got it. Uh moving on here. So your second pick is Zcaler and I'm curious can you just maybe define specifically what exactly Zscaler does and then whether or not it's slightly smaller size than some of the others you know might be a concern to you. you've already mentioned earlier about you know some of the smaller companies you know being more at risk of you know being either acquisition candidates or getting squeezed — for sure so at in a nutshell what zscaler does is that I mean you know I talked about uh co and what that did uh you know when everyone went digital essentially historically how network traffic has worked is that your network traffic so if I'm sitting in in in Toronto, my traffic would actually go to the headquarters, Morning Star headquarters in Chicago, and there would be a firewall that would sort of defend against any nefarious attacks that may come alongside my traffic, right? What Zscaler did is that if I if Ahmed is sitting in Toronto and he wants to access a cloud application, we actually don't need to route his traffic through Chicago. We can just create a tunnel from Ahmed over to the cloud where the application actually resides. So these secure web gateways is what sort of zscaler's claim to fame was um and they primarily operate in the networking in the network security market. Now obviously as I mentioned about you know platformization and vendor consolidation they have moved on to other sort of end markets as well. Uh but that was sort of their core business. To your point about um whether um Zcator since it's smaller than Paulo and Fortnite and Crowd Strike whether it could get squeezed uh as well. I think the company definitely has an enterprise leaning uh customer base has incredibly high retention rates. We're talking late '90s%. Um and then we think that there is like plenty of growth ahead of it, especially as network traffic continues to grow. So again, as I mentioned before, uh you know, uh um we're going to have a ton more agents than human beings actually use networks and actually use the internet, which is going to lead to a ton more traffic. And that's exactly what Zcaler uh uh is is out there uh to secure. So I think I mean there was some data that the company provided in the most recent quarterly report with like uh model context protocol or MCP requests that the

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company's processing is have risen to millions up from basically zero just a few quarters ago. So there's clear traction when we think about Agentic and we think about uh AI usage driving Zcalers uh as a Zcaler sales. I think what investors right now are worried about is again kind of similar to Paulo Zcaler had this acquisition which was I think $675 million for this company called Red Canary and Red Canary operates in a very different segment than network security where ZGAR you know does not have a ton of expertise in and then company the management mentioned uh increased churn in the red canary ARR base or annual recurring revenue base and I think that spooked investors cuz you know you're entering into a new market that you don't really have expertise in and then you're talking about increased churn and then there was like there was some uh I think they could have done disclosures better in terms of what the ARR that they were getting from from Red Canary and what the organic growth rate for Zcaters uh own AR was. Now, from our perspective, since we're not obviously, you know, quarters matter and the next quarter matters and the quarter after that, but if you're thinking about the long-term trajectory of Zcaler, we think that the long-term growth story very well remains intact. Um, and that's why we think there's a ton of upside for investors who have a long investment horizon and are willing to stomach some near-term volatility on this name. — And out of curiosity, where is the Zailor stock trading today compared to your intrinsic valuation? for sure. It's trading in the 150s. Our fair value is 300. So that would imply almost uh 100% upside in the 90s upside. Um so yeah, it's pretty attractive from here. — Anything in the near- term that you would consider a risk on this one? So, one thing I would highlight with Zcaler is that um recently investors have gotten more worried about seatbased pricing um because they're worried about you know white collar job loss and what that means or hiring slowdowns in a lot of enterprises and what that would mean for growth. — Zcaler's main business has always been seatbased. Now management will tell you that 25% of their annual contract value is now consumption based which is immune uh uh to this you know this uh scenario of of job losses or or hiring slowdowns. Um, but I think that's definitely a near-term risk. If the increased contribution from consumption is not able to offset any weakness that we see in seatbased, that could create a headwind and that would force us to sort of re-evaluate our thesis on Zcaler. But we feel good about uh um the ACV contribution from consumption based and we see that sort of growing far in excess of any weakness that uh that we're going to see on seatbased. So essentially what they would do is they would look to move, you know, more and more towards charging for the economic value added that they're providing as opposed to just trying to sell an individual subscription for an individual seat. — For sure. That's I mean and that's a trend that we've been seeing across cyber, right? more and more companies are moving to consumption based uh because it's just it makes a ton of sense um longer term especially as we think about agents and we think about um AI um being deployed at large uh in organizations. — Okay. Well, then let's just wrap things up here. So, the last pick you brought for us today is Fortnet. So, if you could just walk us through your investment thesis there, kind of your outlook for the next couple years and today's valuation. — For sure. So, uh, Fortnite, uh, trades at, uh, there's roughly around 30% upside. So, it trades in the in in in the mid80s. Our fair value is 108. Uh, Fortnite is a much cleaner story. Um, so, you know, it doesn't have some of the execution risks that I mentioned with with Paulo and and Zcaler. Um, what's what Fortnite has is is that it's its core business is firewalls. And then the company has been selling Sassy which is essentially the convergence of networking and security operations on top of its uh firewall uh uh to its firewall customers. So it has more than 800,000 firewall customers and is basically going to those customers and saying hey we're also selling Sassy and SEC ops. Do you want do you guys want to buy them from us? And that creates a very um attractive upsell because you don't have to go and hunt new customers. So, it's it's good for your profitability uh uh as cross-selling is much cheaper than landing new clients. Uh and then as I mentioned, right, like they're doing this at a time when customers have a ton of appetite for vendor consolidation. And by the way, when I say vendor consolidation, customers don't have an appetite because again, it's going to save them 10 20%. They have an appetite for vendor consolidation because it actually improves security outcomes. you know, if

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you have less security vendors, uh, your cost per breach goes down, the frequency of breaches goes down, and that's the trend that these companies are are playing toward. Um, when it comes to Fortnite, uh, the company's clearly seeing a ton of growth in Sassy and Sack Ops, um, while the firewall business also remains pretty healthy. Um, so we're pretty we're pretty um, confident in the company's sort of long-term trajectory. uh and I think I think the market is mispricing uh some of that long-term growth specifically when it comes from sassy and secops and how that is going to sort of uh uh lead to higher topline growth uh for the business. — Got it. Well, Ahmed, thank you very much for joining me today on this bonus episode of the morning filter. And for those of you who would like more information about any of the cyber security companies that we cover, you of course can read Ahmed's analysis on morningstar. com or whichever Morning Star platform you use. And I hope you'll join Susan and I every Monday for the Morning Filter podcast, which is at 9:00 a. m. Eastern, 8:00 a. m. Central. Every week, we cover what should be on your radar for the week ahead. We review what research from Morning Star has been published the prior week you shouldn't miss. And then we always wrap up with either a couple of new stock picks, a couple of stock pans, or swap ideas. Thank you very much for spending your time with us here today.

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