CrowdStrike Holdings, Inc. (NASDAQ: CRWD)
CrowdStrike Holdings, Inc. is an American cybersecurity technology company based in Austin, Texas. It provides cloud workload and endpoint security, threat intelligence, and cyberattack response services. It is a cloud-based cybersecurity platform that protects network endpoints (like phones or laptops) from outside threats. With its recent successes, the company has seen an increase in mentions by 108% over the last day, prompting investors to wonder what makes the stock gain so much hype. Currently, shares of CrowdStrike trade at $183.61 each.
Positive Hype
With strong financials, a solid customer base and great prospects, it would a mistake to look CrowdStrike over. Here are some of the reasons that the company has generated so much positive hype.
It has a solid customer base, 69 of the Fortune 100 use CrowdStrike, and its customer base grew 51% year over year to 19,686 during its fiscal 2023-second quarter (ending July 31).
First, it has established an early mover's advantage in cloud-native cybersecurity services. That's why its number of subscription customers jumped from 2,516 at the end of fiscal 2019 to 19,686 in the second quarter of fiscal 2023. It also has a gross retention rate of 98%.
Revenue grew similarly, rising 58% year over year to $535 million. It surged 93% in fiscal 2020, which ended in January of the calendar year, and grew another 82% in fiscal 2021.
Free cash flow (an important profitability metric) increased 85% to $136 million, giving it a healthy free cash flow profit margin of 25%.
For fiscal 2023, it expects its revenue to grow 53% to 54% and for its adjusted earnings per share (EPS) to nearly double.
Its gross margins have also consistently stayed in the high 70s, which suggests it has plenty of pricing power in that growing market. CrowdStrike sees its opportunity reaching $126 billion over the next few years.
Negative Hype
No investments are 100% flawless, and CrowdStrike wouldn’t be an exception. Here are some reasons why it might not be the best time to invest in the company.
CrowdStrike is priced accordingly at 20 times this year's sales. That high price-to-sales ratio could limit its near-term gains as higher interest rates drive investors toward more conservative investments.
Through the first half of this fiscal year, the company has paid out $234 million in stock-based comp, nearly 23% of revenue generated. The effect this has on prior shareholders is to dilute the value of their stock.
Conclusion
As mentioned above, CrowdStrike is a company that has done well for itself in more ways than one and looks like it will continue to do so over the near future. Although CrowdStrike might be resistant to a poor economy, it is not immune to a recession, and there is a reason for risk-averse investors to avoid this stock. However, despite this, the pros clearly outweigh the cons and the company is definitely one to consider taking a position in right now.
HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.
The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.
Comments