CrowdStrike is a high-growth cybersecurity company that is well poised to benefit from multiple secular tailwinds in the upcoming decade.
Nov. 30, 2021
CrowdStrike Holdings (NASDAQ: CRWD) is one of the hottest stocks in the cybersecurity space. Since it went public in June 2019, CrowdStrike has returned 250% to investors. Despite these stellar gains, CrowdStrike is currently down 24% from all-time highs, allowing you to buy the dip. Let's see if CrowdStrike stock is a good investment right now.
The bull case for CrowdStrike
Founded in 2011, CrowdStrike aims to gain traction in the cloud-based cybersecurity vertical. The company built its CrowdStrike Falcon platform, the first multi-tenant intelligent security solution that protects workloads across enterprise environments and devices. It offers 21 cloud modules on the Falcon platform spanning large security markets that include endpoint and cloud security, as well as threat intelligence, identity protection, and log management.
CrowdStrike has managed to increase sales from $118.75 million in fiscal 2018 to $874.4 million in fiscal 2021 ended in January, indicating an annual growth rate of almost 95%.
In the fiscal second quarter of 2022, CrowdStrike revenue rose by 70% year over year to $337.7 million. Subscription revenue grew by 71% to $184.3 million, while annual recurring revenue increased by 70% to $1.34 billion.
The company added 1,660 net new subscription customers in Q2 and ended the quarter with a customer base of 13,080, an increase of 81% year over year. CrowdStrike's customers include big-ticket giants such as Goldman Sachs and Sony.
The company's stellar revenue growth enabled it to increase adjusted net income to $25.9 million in Q2 or $0.11 per share, compared to $7.9 million or $0.03 per share in the year-ago period.
Similar to other asset-light tech companies, CrowdStrike also benefits from high operating leverage, allowing it to expand profits faster than revenue.
The bear case for CrowdStrike
It's difficult to look beyond CrowdStrike's growth story, but the stock remains vulnerable in a broader market sell-off. Trading at a market cap of $51.25 billion, analysts expect CrowdStrike revenue to touch $2 billion in fiscal 2023, valuing the stock at a forward price to sales ratio of more than 25x, which is exceptionally frothy. Comparatively, its price to earnings multiple is also sky-high at 288x.
Further, CrowdStrike reported an operating loss of $47.4 million in Q2, which was wider than a loss of $30 million in the year-ago period due to high research and development expenses as well as stock-based compensation.
So, should I buy CrowdStrike stock?
Market research firm IDC has identified CrowdStrike as a market leader in the Corporate Endpoint Security segment, which positions the latter to keep gaining traction given the accelerated shift towards remote work at the global level. CrowdStrike also generates a significant portion of its revenue from subscription sales, enabling steady cash flows across business cycles.
Its market leadership, improving profit margins, and robust growth prospects make CRWD stock a top buy for long-term growth investors.
Quickfire round
Is CrowdStrike profitable?
CrowdStrike still reports a GAAP loss.
What is CrowdStrike's market cap?
CrowdStrike is valued at a market cap of $51.24 billion.
Does CrowdStrike pay investors a dividend?
No, CrowdStrike does not pay a dividend to investors.
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