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    CrowdStrike Holdings Inc. (CRWD) stock is Becoming More Attractive by the Day. Here’s Why?

    By Gule Rukhsar

    May 20,2022

    2:26 AM UTC

    Cybersecurity has been gaining popularity since the pandemic when a stark and accelerated shift to a more digitalized and technology-first world started. It has evolved into a basic necessity in today’s world. Businesses and individuals are growing more and more dependent on computers, smartphones, and other intelligent devices. With the increased use of online data storage and cloud solutions, demand for data and information protection is also exploding. A further escalating factor in the demand for cyber security has been the Russian invasion of Ukraine, which has fueled cyber attacks. Cyber attacks pose a threat to individuals, businesses, and governments in both financial and informational terms. With the increasing demand for cybersecurity, its market is expected to grow at a compound annual growth rate of 13.5% between 2022 and 2029.

    Amid this trend, CrowdStrike Holdings Inc. (CRWD) has been proving itself more and more worthy. The company brings together cloud technology, artificial intelligence, and cybersecurity, which marks triple ticks for it. The continued tailwinds are expected to further boost the company on a bullish path as it stabilizes its exponential growth in the coming quarters. However, headwinds from the peaking inflation exist which with the aggressive Fed might just tip the U.S. economy into recession. But on the brighter side, the market and company outlook are both bullish in the longer run.

    CRWD’s Analysis

    The cloud-native cybersecurity firm has been a prominent pandemic darling with its shares skyrocketing by 258% between January 2020 and December 2021. But since the November peak last year, the stock has plunged over 30%. This decline comes from the wider market downfall, with the Nasdaq Composite squaring the bear territory and others closing on it. Despite the sell-off, the stock has seen multiple upgrades in recent weeks.

    Currently, CRWD stock is valued at $148.94 a share as per data of the extended trading session on May 19, 2022. The stock witnessed gains of 2.99% in the regular session and 4.42% in the after-hours on Thursday. Consequently, CRWD stock prices gained 5.72% to 150.80 in pre-market trading today.

    Recent & Upcoming Earnings

    On March 9, the company posted earnings for the fourth quarter and fiscal year 2022, which ended on January 31, 2022.

    Source: Corporate Finance Institute

    Continuing its mammoth growth, the company’s revenue surged by 63% YOY to $431.0 million in the fiscal 2022 fourth quarter. This compares to the year-ago revenue of $264.9 million. The subscription revenue was up 66% YOY.

    The annual recurring revenue (ARR) grew by 65% in the quarter to stand at $1.73 billion. However, the non-GAAP subscription gross margin was 79% against 80% in the same period of the previous year.

    Net income totaled $70.4 million with earnings per share of 30 cents in the quarter while the same was 13 cents in Q4 fiscal 2021.

    At the end of the quarter, the company had cash and cash equivalents of $2.0 billion.

    For the full fiscal year, CRWD made a profit of 67 cents per share on revenue of $1.45 billion, which grew by 66% YOY.

    Future Outlook

    For Q1 and fiscal year 2023, the company provided the following guidance:

    Metrics Q1 FY2023 Full Fiscal 2023
    Total Revenue $458.9-$465.4 million $2,133.1-$2,163.2 million
    Non-GAAP Net Income $52.0-$56.7 million $251.1-$273.6 million
    Diluted Earnings Per Share $0.22-$0.24 $1.03-$1.13

    Based on the guidance figures, the company is looking ahead to revenue growth of 42-47% this year. While this is less compared to its above 65%, it is still a great number. The company has been doubling its revenue for the past few years; it makes much sense that the revenue growth will now normalize somewhat. A further reason for this revenue growth being a good figure is the broader market instability and downfall owing to the geopolitical and economic turmoil.

    Additionally, the company will be releasing its Q1 fiscal 2023 earnings for the quarter ended on April 30, on June 2, 2022, after the bell.

    CRWD’s Strong Base

    In the past five years, the company has registered a healthy 105% compound annual growth rate for subscribers. Moreover, retaining customers has also been a huge plus with its dollar-based net retention rate (DBNR) being above 120% for 16 consecutive quarters. The cherry on top, the company’s gross retention rate has been over 98% for the past three years.

    Falcon, the company’s security platform, brings an edge of being cloud-native and artificial intelligence enhanced. Also, the company was recently granted Impact Level 4 authorization from the U.S. Department of Defense (DoD). This enables better access to controlled, unclassified information at the federal level.

    Target Price of CRWD

    Given its strong performance and fundamentals, CRWD has been getting target price upgrades from many experts. Recently, Wall Street, Deutsche Bank, Mizuho, and Baird raised their price targets for the stock. In April, the investment bank Goldman Sachs upgraded the stock from a Neutral rating to a Buy rating while discussing the numerous tailwinds for cybersecurity at large. The current target price from the investment firm is $285 per share from the previous $241.

    Conclusion

    The cybersecurity market is burgeoning with many tailwinds, pushing it further ahead as demand increases and cyber threats rise. Amid this growing industry is CRWD, which has been proving its potential over the recent years while more than doubling its revenues and getting stock price upgrades. Thus, with a bullish long-term outlook of the industry and the company, the stock is a good buy, according to Goldman Sachs and many others.

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