Why CrowdStrike Stock Is Cheaper than It Looks

Shares of cloud-based cybersecurity firm CrowdStrike (CRWD) bucked the trend last Thursday, with shares rising over 12% in a rough reversal day for tech stocks.

The company pulled the curtain on any outstanding fourth-quarter results, inspiring many analysts to upgrade their view of the stock. 

The big beat was exactly what CrowdStike needed to end a slump that saw shares plunge around 48%. Still, with investors continuing to take a raincheck on high-multiple names (CrowdStrike is still one of the pricier growth stocks in this market), it may not take long for recent post-earnings gains to be surrendered.

In any case, CrowdStrike is one of the best companies to play the long-lived secular trend in cybersecurity.

With the Ukraine-Russia crisis opening the door to a new world of cyber threats, the importance of cybersecurity is likely to be emphasized over the coming weeks. I am bullish on CRWD.

CrowdStrike Stock: Expensive, Not Overvalued

Though CRWD stock is much cheaper than it was just a few weeks ago, the 31.8 times sales multiple remains tough to get behind, as growth stocks continue to implode under the pressure of higher interest rates.

With stagflation fears and a flattening U.S. yield curve, it seems like the worst possible time to buy the dip on growth. Given that cybersecurity is necessary, regardless of the health of the broader economy, I view the name as less sensitive should a recession strike at some point over the next year.

In a way, a well-run cybersecurity stock can be seen as a peculiar mix of aggressive growth and economic defensiveness.

Looking five years out, the risk/reward seems too good to pass up, despite the choppy macro environment and growing risks of recession.

CrowdStrike’s Q4 2022

CrowdStrike surpassed consensus estimates in Q4 2022. Subscriber growth remained strong, with annual recurring revenue soaring 65% year-over-year.

Signs point to continued strength on this front moving forward, as the Ukraine-Russia crisis inspires many U.S. firms to buy into CrowdStrike’s cybersecurity platform. Crowdstrike’s endpoint protection service can really grant peace of mind for firms during turbulent times.

The ongoing crisis could inspire many firms to retire legacy products for more modern, proactive solutions like those offered by CrowdStrike. As turbulence rattles global markets, expect the company to continue putting its foot to the gas to stay a step ahead of continuously evolving cyber threats.

Analyst Dan Ives of Wedbush Securities is a big fan of the “core cyber stocks,” which include CRWD, noting that they’ll be likely beneficiaries from an uptick in cyberattacks that could accompany the Ukraine-Russia crisis.

Wall Street’s Take

According to TipRanks’ analyst rating consensus, CRWD stock comes in as a Strong Buy. Out of 24 analyst ratings, there are 23 Buy recommendations and one Hold recommendation.

The average CrowdStrike price target is $265.71, implying an upside of 43.1%. Analyst price targets range from a low of $212 per share to a high of $340 per share.

Bottom Line on CrowdStrike Stock

CrowdStrike’s numbers were spectacular. Still, many firms that have delivered solid earnings have struggled to claw onto their immediate post-earnings gains.

Big quarterly beats and raises don’t have the same impact as they used to in today’s risk-off environment. As such, I think there’s a high chance that patient investors will receive another opportunity to get in at a price closer to 52-week lows of around $150 per share.

With so much travesty weighing down the macro picture, investors can be quick to forget the outperformance of individual companies.

In any case, CrowdStrike is one of few high-quality “expensive” growth stocks that can still justify its premium price tag. The firm also seems like a great hedge against the ongoing Ukraine-Russia crisis, which could lead to a horrific cyberwar.

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