CrowdStrike Holdings, Inc. (CRWD) is one of the premier cybersecurity firms in the world. Its cloud-based solution, Falcon, is a subscription service with stackable modules. Some offerings include threat intelligence, identity protection services, vulnerability management, and many others. Together they seek to complete the company’s stated mission: “We Stop Breaches.”
CrowdStrike went public in June 2019 and was founded in 2011.
I am bullish on CRWD stock. (See Analysts’ Top Stocks on TipRanks)
CrowdStrike Selected by CISA for Endpoint Protection
In May of 2021, President Biden signed an executive order on cybersecurity. This order made clear the grave dangers that are faced by the nation’s critical infrastructure. Departments were instructed to work with each other and with the private sector to modernize and bolster protections. In clear terms, the executive order dictated that cybersecurity was to be a “top priority.”
To this end, on December 1, 2021, the United States Cybersecurity and Infrastructure Security Agency (CISA) and CrowdStrike announced a partnership to protect government endpoints and workloads. Multiple government agencies will be using the Falcon platform. CISA choosing CrowdStrike is a very impressive feather in the company’s cap.
CrowdStrike Has Top-Notch Metrics
Also on December 1, 2021, CrowdStrike released impressive Q3 Fiscal 2022 earnings. These earnings show a continuation of the company’s impressive results. Revenue in the quarter grew to $380.1 million, a 13% increase over Q2 and a 64% increase year-over-year. Gross profit margin on subscription services remained very strong at 76% on an unadjusted basis, suggesting that CrowdStrike has a massive ability to scale to profitability.
CrowdStrike is spending heavily on sales and marketing to gain customers and scale into a very large total addressable market (TAM). 1,607 new customers were added in Q3 for a total of 14,687. This amounts to a 75% year-over-year increase.
The company estimates its TAM at $54.8 billion in 2022 and building to over $67 billion by 2024. Current annual recurring revenue of just over $1.5 billion means a massive market is yet to be tapped. CrowdStrike spends very efficiently to increase customers, as evidenced by its reported SaaS Magic Number of 1.3.
The company also grows revenue from current customers far in excess of any customer churn, as shown by the company’s net retention rate over 124%. Forgoing profits at this stage to increase the number of customers is the correct strategy.
CrowdStrike Valuation
CrowdStrike stock is down over 32% in the past month. Growth stocks have fallen out of favor on macroeconomic fears. Interest rate hikes, faster than expected tapering, and other concerns are prevalent in the market.
This may indicate a compelling entry point as the bullish case for CrowdStrike has not changed. However, there is a risk that the stock will fall further, as the valuation remains quite high at about 32 times forward sales. CrowdStrike is a stock best for long-term aggressive growth investors.
Wall Street’s Take
Turning to Wall Street, analysts have a Strong Buy consensus rating on CRWD stock. This is based on 13 Buys, two Holds, and one lone Sell rating.
The average CrowdStrike price target is $289.20. This implies 45.4% upside potential from the current price.
Summary on CrowdStrike
CrowdStrike remains one of the top picks in the cybersecurity sector despite the recent downturn in growth names. CISA selecting the company shows that it is a major player in the industry. In addition, the company is performing admirably on a host of metrics. Revenue is steadily climbing, and the TAM will allow this to continue unabated for the foreseeable future.
CrowdStrike is efficiently gaining customers and spending heavily on marketing. For this reason, the company is not yet profitable on a GAAP basis. CrowdStrike remains a best-in-breed stock for aggressive growth investors.
Disclosure: At the time of publication, Brad Guichard had a position in the securities mentioned in this article.
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