🔐 Is Crowdstrike Hitting Its Stride?

Charles Schwab shares slump.

Hey Global Investor! Here’s what you need to know before the US markets open.

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🔐 Crowdstrike: Striking Hot Iron?

Cybersecurity firm Crowdstrike Inc. (CRWD) is seeing an increased demand for threat detection technologies and has deployed its technology across federal agencies. With multiple tailwinds pushing it forward, the company plans to achieve $5B in revenue by 2025. (Tweet This)

Endpoint Is Just The Beginning!

The need for Cybersecurity has never been higher. How high? One data point should tell the story: $77.5B was spent on Cybersecurity M&A globally in 2021. 

Crowdstrike provides security products covering cloud, identity, and data security through the Falcon platform. Falcon is an AI-based, self-learning software that neither slows down cloud servers nor requires a reboot when installed.

The company is a market leader in endpoint security. That means it focuses on endpoints like cell phones, computers, and other devices, enabling customers to determine which endpoints are safe to access protected data.

Crowdstrike, a recognized leader in Endpoint Detection and Response and in-depth threat intelligence, steadily gained market share in this stream in the past three years. By June 2021, the company had doubled its market share to 14.2% in the modern endpoint security space, from 7.9% at the end of 2019.

Large corporates are turning to Crowdstrike for cybersecurity. As of January 31st, 2022, the company counts among its customers 65 of the Fortune 100 companies, 254 of the Fortune 500 companies, and 15 of the top 20 US banks.

Crowdstrike reported Q4 2022 results last month which surpassed estimates.

Key Highlights from Q4:

  • Revenue: $431M Vs $412.3M estimate
  • Earnings Per Share: $0.30 Vs $0.20 estimate

The company’s revenue grew 63% Y-o-Y, with subscription revenue growing 66% from last year. In addition, 1.7K net new subscribers were added during the quarter, taking the total number to 16,325. The number of subscribers at the end of FY 2021 was 9,896. The US accounts for 72% of the company’s revenue.

Of Tailwinds And Targets

Crowdstrike expects to reach $5B in Annual Recurring Revenue (ARR) by fiscal 2026. At the end of fiscal 2022, its ARR stood at $1.73B. The company is also building a broad, threat-detection cybersecurity platform, XDR or Extended Detection and Response. The platform will monitor endpoints, web and email gateways, web application firewalls, and the cloud.

Why is Crowdstrike confident it can meet the expected ARR? For starters, a couple of weeks back, the company received provisional authorization for “Impact Level 4” from the Defense Information Systems Agency. This permission allows Crowdstrike to deploy its cybersecurity platform across various federal agencies and safeguard information when these agencies use cloud services.

“Impact Level 4” accommodates controlled unclassified information. Crowdstrike is working towards an “Impact Level 5” clearance, which authorizes it to store and process Pentagon’s most sensitive, unclassified data.

In addition, Crowdstrike has partnered with cybersecurity peer Mandiant to integrate some of their services for customers that already use both companies to protect networks and respond to incidents. The “strategic partnership” will first involve merging Crowdstrike’s cloud-based Falcon threat intelligence platform into Mandiant’s cybersecurity consulting services.

Google’s parent, Alphabet, has just acquired Mandiant for $5.4B in cash. The partnership with Mandiant puts Crowdstrike in close contact with Google. Amidst these tailwinds, analysts are sitting up and taking notice as the company finds itself in a sweet spot of demand given the geopolitical situation with Russia and Ukraine.

Shares of Crowdstrike are up 20% this year but are still down 20% from their peak. On a trailing 12-month price-to-sales basis, the stock trades at a valuation of 37.5x, compared to Mandiant’s 11x and Zscaler’s 48x. Investors can’t wait for the company to strike the iron while it is hot!

Market Reaction
CRWD ended at $224.99, down 4.35%.

Company Snapshot 📈

CRWD $224.99 -10.23 (4.35%)

Analyst Ratings (30 Analysts) BUY 93%  HOLD 7%  SELL 0%

Newsworthy 📰

More Suitors: Apollo Global considers participating in a bid for Twitter (TWTR +7.48%)

Improvement: Bank of America shares jump after lender tops estimates on better-than-expected credit (BAC +3.41%)

Most In Two Years: Charles Schwab shares tumble as earnings miss estimates on trading slump (SCHW -9.44%)

Later Today 🕒

  • Netflix Inc. Earnings (NFLX)
  • Johnson & Johnson Earnings (JNJ)
  • International Business Machines Corp. Earnings (IBM)
  • Lockheed Martin Corp. Earnings (LMT)
  • Las Vegas Sands Corp. Earnings (LVS)
  • Hasbro Inc. Earnings (HAS)
  • Halliburton Co. Earnings (HAL)
  • The Travelers Companies Inc. Earnings (TRV)
  • Spirit Airlines INc. Earnings (SAVE)
  • Interactive Brokers Group Inc. Earnings (IBKR)
  • Armour Residential REIT Inc. Earnings (ARR)
  • Cassava Sciences Inc. Earnings (SAVA)
  • Truist Financial Corp. Earnings (TFC)

Today’s Fun Fact

The word LEGO is formed from the Danish word “Leg Godt” which means ‘play well’ in English. In Latin, it means ‘putting together’

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