From cybersecurity to platform service providers, in the world of cloud computing, we ask if CrowdStrike or Fastly is a better investment?
In the world of cloud computing and streamlined video and gaming services, the question of which stock should you invest in might crop up now and then. Thus, out of a plethora of different stocks to choose from, we found that CrowdStrike (NASDAQ: CRWD) and Fastly (NYSE: FSLY) could be good options for an investor in the cloud computing market. But which one is a better investment right now?
Bull and bear case for CrowdStrike
CrowdStrike is a useful company for a new technological era of cloud computing. It provides cybersecurity by analyzing and responding to threats.
CrowdStrike has shown a very robust financial performance during the last year. This can be attributed to the work-from-home shift which is likely to continue for the foreseeable future. For CrowdStike's fiscal year 2021, it reported just over $1 billion in annual recurring revenue. In addition, it reported 1,480 new subscribers, up 70% year-over-year (YoY).
As the number of subscribers increases, CrowdStrikes security services will improve as its AI-powered database collects more actionable information. Thus, for investors, it is a good sign that over time its platform will become increasingly more valuable. Furthermore, the cybersecurity company boasts an impressive 98% client retention rate over the past two fiscal years, meaning that its existing customers are happy with its service.
Cybersecurity spending is likely to increase in response to the rising number of cyber threats as a day-to-day business relies more and more heavily upon cloud computing. This will serve as a tailwind for the sector as a whole, from which CrowdStrike will benefit. It is predicted that the cloud industry will be valued at just under $38 billion by 2027, growing at a CAGR of 26%. Spending rates on cybersecurity will therefore also rise from an estimated $165.8 billion this year to $366.1 billion in 2028.
The CrowdStrike share price has done well too, currently up around 220% in the last 12 months. However, it has seen some volatility in 2021. Whilst the above estimations show a great investment opportunity, there are some bears on this stock who worry that its impressive trend over the last year will falter if normality returns. However, with the switch to cloud-based computing in full force, this worry is a small one.
Bull and bear case for Fastly
Fastly is an edge cloud platform provider, which has been a major player in the global digital transformation. Fastly is the go-to company for image optimization along with video and streaming services. Indeed, TikTok is one of Fastly's biggest clients for this very reason.
Fastly is a stock that has benefitted from the pandemic with its full fiscal year 2020 delivering $291 million in revenue, up 45% YoY. Furthermore, its average customer spend was up just under 4% from Q3 to Q4 coming in at $782,000. For the current quarter, the company expects revenue to come in at $83 million.
Fastly has also joined the Google Cloud Marketplace as the first cloud-based CDM solution partner. This will benefit Fastly as a wider range of customers will be attracted to its services that can cater to a wide variety of industries, including e-commerce, media, and high tech. It also offers opportunities to expand further on a global scale, reaching many different regions.
There are many critics who believe that this company will experience a slowdown over the course of this year as life in a pandemic either becomes normalized or is combated with vaccines. This could represent a lessening of customer spend and revenue overall as people begin to go back to normal and spend less time on sites that need streaming service optimization.
Additionally, short-term volatility with this stock is a reality, with its share price regularly rising to $100 or more per share and then dipping back to around $70. However, this stock is a good long-term opportunity as its combination of services including low-latency edge computing tools and high-speed CDN services mean it will be in demand for many years to come.
So, which should I invest in?
Whilst Fastly has a strong case for long-term investors, the risk is a little higher than some might be comfortable with, particularly with regards to its unstable stock price. On the other hand, CrowdStrike is a stronger candidate as it is growing fast in response to the increased cybersecurity risk and it will continue to do so for the foreseeable future.
With stronger financials and a brighter outlook, CrowdStrike would be the better option for these two stocks.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
