Morgan Stanley flags $45B hidden cybersecurity opportunity

Artificial intelligence-driven panic erased approximately $300 billion of market value on Feb. 3 across the software industry, according to Forbes.

Cybersecurity stocks have also been caught up in the same sell-off, and Morgan Stanley analyst Meta Marshall thinks this is the perfect time for investors to realize that AI is a tailwind for cybersecurity, and that the market is poised for huge growth.

She said AI expands the attack surface and improves the attack vectors.

The larger attack surface is caused by the usage of AI to write code, by running LLMs, and by agents. LLMs are vulnerable to prompt injection attacks and can leak proprietary information. AI-generated code often introduces security vulnerabilities. AI enhances hackers’ offensive capabilities by enabling advanced phishing, prompt injection, and data poisoning.

Increased AI usage will increase the need for security investments to:

• Protect against AI-based attacks
• Protect AI usage
• Use AI for security
  Source: Morgan Stanley analyst Meta Marshall

“With 14% of organizations already reporting an AI breach and 16% noting their breaches used AI, this has become an urgent spend priority,” Marshall wrote in her note shared with me. “If security spend intensity eventually matches IT spend intensity, AI security could become a $45bn+ market in [the] coming years, from ~$16bn today, a 30-40% CAGR.”

Last year, it really felt as if the attacks were becoming more common and effective. I wrote about the biggest ones in my article “5 things you should know about cyberattacks in 2025.”

Morgan Stanley is the most positive about CRWD and PANW

Marshall said she is most positive on CrowdStrike (CRWD), due to the few mergers and acquisitions or memory overhang. She reiterated an equal-weight (hold) rating for CrowdStrike and a $537 price target.

CrowdStrike is down 8.35% year to date, at $429.64, at the time of writing Saturday morning, Feb. 14. The upside is close to 25%. The company will report earnings on March 3.

Analyst’s next choice is Palo Alto Networks (PANW). She said she is optimistic about the company, particularly now that it has completed acquisitions of Chronosphere and CyberArk. She reiterated an overweight (buy) rating for Palo Alto Networks and the price target of $245.

Palo Alto Networks is down 9.36% year to date, at $166.95. The upside is close to 47%. The company will report earnings on February 17.

While big players CRWD and PANW could be seen as obvious choices, Marshall turned her attention to the stocks for which she sees “checks continuing to be positive.”

Morgan Stanley sees great long-term opportunities in these Cybersecurity stocks

Marshall said that Zscaler (ZS), SentinelOne (S), Netskope (NTSK), and SailPoint (SAIL), which have all been beaten up year to date, are great long-term opportunities with very attractive entry points in the near term.

For Zscaler, the analyst expects upside to the consensus Q2 annual recurring revenue (ARR) of 24% to 25% year over year, due to the robust pipeline, which implies negative 26% quarter-over-quarter seasonality for the net new ARR (NNARR). This is well below the historical average, given last quarter’s Red Canary contribution.

She reiterated an overweight rating for Zscaler and a price target of $305. Zscaler is down 20.99% year to date, at $177.72. The upside is a whopping 71%. The company will report earnings on February 26.

For SailPoint, she expects upside to consensus estimates and management’s guidance (at the midpoint) for Total ARR of $1,122 million (+28% YoY), implying QoQ growth of +8% and NNARR of $82 million. She reiterated the overweight rating for SailPoint and the $25 price target. SailPoint is down 21.3% year to date, at $15.92. The upside is 57%.

More AI Stocks:

• Morgan Stanley sets jaw-dropping Micron price target after event
• Bank of America updates Palantir stock forecast after private meeting
• Morgan Stanley drops eye-popping Broadcom price target

Marshall expects SentinelOne to report Q4 revenue modestly above management’s guidance of $271 million, implying approximately 20.2% YoY growth. Analyst reiterated Equal-Weight rating for SentinelOne and the price target of $18. SentinelOne is down 7.53% year to date, at $13.87. The upside is 29.7%. The company will report earnings on March 12.

The analyst believes that Netskope will achieve ARR growth of more than 30% YoY in Q4, driven by improving gross new bookings and net retention trends over the past few quarters.

She also expects Q4 revenue growth to come in above consensus, at approximately 27.5% YoY. Marshall reiterated the overweight rating for Netskope and the $27 price target. Netskope is down 32.21% year to date, at $11.89. The upside is an amazing 127%. The company will report earnings on March 11.

The author has no position in the stocks mentioned at the time of publication.

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