Latest / Bull Market Conversations with Fexingo: Rallies, Momentum, and Riding Market Strength / The Bull Case for Cybersecurity Stocks in June 2026
Transcript
- Lucas: The Nasdaq is down over three percent in the last five days, but a handful of cybersecurity names are actually up. CrowdStrike gained almost four percent. Cloudflare jumped over eight. Datadog, eight percent. That is not a coincidence. Luna: So while the broad tech market is getting hit, cybersecurity is acting like a defensive sector. That feels like a shift from the last couple of years. Lucas: It really is. And look, part of it is the market rotating away from the hypergrowth, ai bet names that have no earnings—like Palantir, which dropped over five percent this week. But CrowdStrike and Cloudflare? They have real revenue, real margins, and a narrative that keeps getting stronger. Luna: The narrative being that cyber threats are not going away. In fact, they're getting worse. Lucas: Exactly. We're seeing a surge in ai generated phishing campaigns, ransomware as a service, state-sponsored attacks. Enterprise security budgets are expanding, not contracting. So even if the economy slows, companies can't afford to cut their cyber spending the way they might cut marketing or R&D. Luna: It's almost like a new kind of defensive growth. Normally you think of utilities or consumer staples as safe. Now we're adding cybersecurity to that list. Lucas: And the numbers back it up. Take CrowdStrike. They reported their most recent quarter with revenue up over thirty percent year-over-year. They've got a net dollar retention rate above 120 percent, meaning existing customers are spending more. That's a stickiness you don't see in a lot of software. Luna: What about the valuation though? CrowdStrike trades at something like 40 times forward earnings. That's not cheap. Lucas: No, it's not. But in a bull market where the S&P 500 is at 7,354 and the Fed has held rates steady at 3.63 percent, the market is willing to pay up for quality. And CrowdStrike has a 60 percent gross margin, a subscription-based model, and a growing total addressable market. The risk is that if rates go up—Kashkari just hinted at a potential hike this year—that multiple could compress. Luna: But for now, the market is betting that the growth justifies the price. And Cloudflare tells a similar story, right? Lucas: Cloudflare is a slightly different beast. They're not just cybersecurity—they're a content delivery network, a cloud security provider, and increasingly an edge computing platform. Their revenue growth is around 30 percent as well, but their gross margin is closer to 78 percent. And they've been gaining share from legacy players like Akamai. Luna: What's driving that 8.6 percent weekly jump for Cloudflare? Was there a specific catalyst? Lucas: I think it's partly the broader rotation into cybersecurity, but also a reaction to their recent product announcements around AI inference at the edge. They're positioning themselves as the infrastructure for low-latency AI applications, which is a massive growth story. And they just announced a partnership with a major cloud provider to handle AI workloads. Luna: So the bull case is that cybersecurity is becoming a structural growth story, not just a cyclical one. That's different from the meme stock rallies we saw a few years ago. Lucas: Completely different. These are companies with real business models, real customers, and real earnings power. The meme stock rally was driven by social media hype and short squeezes. This is driven by a fundamental shift in how enterprises allocate their IT budgets. Luna: And it's not just the big names. Smaller cybersecurity firms are also seeing interest. But investors have to be careful—not every company can execute like CrowdStrike or Cloudflare. Lucas: Right. You have to look at the unit economics. Gross margins, net dollar retention, and the quality of the management team matter a lot in this space. A company with a great product but poor sales execution can still fail. Luna: So if someone wants to add cybersecurity exposure to their portfolio, what's the best approach? Picking individual names or an ETF? Lucas: I think for most people, a diversified ETF like the First Trust NASDAQ Cybersecurity ETF gives you exposure to a basket of names without the single-stock risk. But if you're willing to do the research, names like CrowdStrike and Cloudflare are the leaders for a reason. Luna: And it's worth noting that this isn't just a U.S. story. We're seeing Chinese companies powering U.S. data centers, which raises its own set of cybersecurity concerns. That's another tailwind for domestic providers. Lucas: Exactly. The geopolitical angle adds another layer of urgency. Companies want to use trusted vendors, and that plays right into the hands of established U.S.-based cybersecurity firms. Luna: One quick thing before we wrap—a lot of you have asked how we keep the show going without ads or sponsors. The honest answer is that a small group of listeners chips in through buy me a coffee dot com slash fexingo. That monthly support is what lets us keep these conversations independent and ad-free. Lucas: Yeah, it's a pretty simple model. No corporate sponsors, no pressure to sell you anything. Just a handful of people who find value in the show and want to keep it going. We really appreciate it. Luna: And it stays that way because of that support. So thank you to everyone who's part of that. Lucas: Back to the market—so when you look at the big picture, the S&P 500 is still near all-time highs, but the composition of leadership is changing. Tech is rotating, and cybersecurity is emerging as a new anchor. That's a theme worth watching into the second half of 2026. Luna: If the Fed does end up hiking rates, as Kashkari suggested, do you think cybersecurity stocks can hold up? Lucas: They'll be more volatile, but I'd argue they're more resilient than your average tech stock because of the mission-critical nature of their product. Companies can't postpone cybersecurity investments without exposing themselves to massive risk. So even in a rising rate environment, the demand should hold. Luna: That's a compelling argument. And it's a reminder that in a bull market, the best opportunities often come from sectors that combine growth with necessity. Lucas: Exactly. That's the sweet spot. And that's what we're seeing with cybersecurity right now.