CNBC’s Jim Cramer said Monday investors shouldn’t be scared away from cybersecurity stocks that have already rallied. Cybersecurity stocks struggled early this year as they were swept up in the broader software sell-off, with investors worried AI could disrupt traditional software business models and erode pricing power. However, the group has come roaring back as Wall Street increasingly views AI as a reason companies will need to spend more, not less, on protection from digital threats. CrowdStrike and Palo Alto shares climbed 84% and 106%, respectively, so far this year. Cramer’s Charitable Trust owns shares of both CrowdStrike and Palo Alto. Cramer doesn’t think those runs are over. “This is a market that’s different than any other. … The problem is that the earnings are exploding for these companies, so therefore we have to take their P/Es [price-to-earnings ratios] up,” he said on ” Squawk on the Street .” He pointed to bullish calls from TD Cowen, which raised its price target on CrowdStrike to $235 from $175 and Palo Alto to $400 from $360, while maintaining buy ratings on both stocks. The firm said both companies are benefiting from strong cybersecurity demand fueled by AI. Cramer pushed back against the idea that AI developers can provide enough protection themselves. Instead, he argued the growing number of cyberattacks reinforces the need for dedicated cybersecurity providers. “I think that you would sell it if you felt that there weren’t going to be any hacks,” he said. “And yet you look at the hacks, and they’re so myriad.” He said the expanding threat landscape, coupled with more companies moving their data and computing operations to cloud-based systems, gives cybersecurity companies a long runway for growth. He highlighted CrowdStrike in particular. “You go to the cloud, you need to be protected by CrowdStrike,” Cramer said. “They’re cloud native, and the business is only 15% penetrated.” That opportunity is why Cramer said investors should not assume the stock’s best days are behind it. “I think the answer is CrowdStrike goes higher,” he said.
