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Is this cyber security name a buy?

It’s time to explore a cyber security leader. Here is the break down of $CRWD, otherwise known as CrowdStrike.

Current Price: $261.79

52/Wk High: $269.89

52/Wk Low: $93.37

Market Cap: $59.1 Billion

Read below for the break down!

CrowdStrike ($CRWD) is a leading cyber security company that offers a cloud-native and multi-tenant solution for endpoint defense and more.

The company’s digital security platform is called Falcon and is offered to customers through a bevy of software as a service (SaaS) levels including Falcon Pro, Enterprise, Premium, and Complete.

Furthermore, CrowdStrike offers 19 modules via their Falcon platform. The modules focus on a multitude of digital security areas including endpoint solutions, threat hunting, threat intelligence, cloud security, and workload management.

CrowdStrike is led by CEO, President, and co-founder George Kurtz. Kurtz boasts more than 28 years of experience within the security industry and held prior positions at McAfee and his own company Foundstone.

The company’s management team also maintains leaders with prior experience from the likes of the FBI, Kratos Defense & Security, OpenDNS, Microsoft, and CyberArk Software.

In recent news, CrowdStrike acquired Humio, a leading “high performance cloud log management and observability technology” provider. CrowdStrike acquired the company for $400 million, and completed the deal in early March.

Leadership noted that the Humio acquisition will accelerate the company’s XDR capabilities and create a new industry standard for XDR technology.

Management was upbeat about the deal.

“Humio will enhance CrowdStrike’s ability to solve real-world customer problems with its cloud-native platform by adding index-free data ingestion and analysis capabilities for both first- and third-party data,” Kurtz said.

CrowdStrike’s customer base is strong as well, with customers including Goldman Sachs, Zebra, Credit Susse, Sony, Hyatt, and ADP to name a few. Overall, the company finished Q1 with 11,420 subscription customers.

The company’s customer base continues to expand rapidly as well. In fact, throughout Q1 CrowdStrike’s subscription customer count increased by 82% year-over-year, meaning the company added 1,524 net new subscription customers in Q1 alone.

Digging into the numbers CrowdStrike beat Q1 2022 expectations with an EPS of $0.10, better than the analyst’s EPS consensus estimate of $0.06. On a year-over-year basis, EPS improved by 400%.

On the revenues front, CrowdStrike reported $302.8 million in revenues for Q1, representing a significant 70% year-over-year improvement in total revenue. For reference, the Q1 2021 total revenues level was $178.1 million.

Sifting through revenues the company reported $1.19 billion in annual recurring revenues (ARR) as of April 30th, meaning CrowdStrike added $143.8 million in ARR throughout Q1. Overall, ARR improved by 74% year-over-year.

Rounding out revenues, CrowdStrike reported $21.615 million in professional services revenue, representing a strong improvement over the segment's Q1 2021 level of $15.856 million.

Shifting into income, CrowdStike reported a loss from operations in Q1 of $31.3 million, representing a larger loss than the Q1 2021 loss from operations of $22.6 million. On the flip side, non-GAAP income from operations landed at $29.8 million, representing an improvement over the previous year's same time level of $1.2 million.

CrowdStrike also reported a Q1 net loss of $85 million, significantly larger than the Q1 2021 net loss of $19.2 million. Do note, the loss included a $48.8 million tax cost related to the Humio acquisition.

Margins on the other hand improved, with subscription gross margin landing at 77% and non-GAAP subscription gross margin improving from 78% to 79%.

Profits accelerated in Q1 as well, with Q1 2022 gross profit totaling $224.338 million. For reference, the Q1 2021 gross profits level was $131.183 million.

Finally, cash flows improved throughout the quarter, with CrowdStrike generating $147.5 million from operations, a much higher cash generation level than last year's $98.6 million. Free cash flow landed at a record level as well, totaling $117.3 million versus the Q1 2021 level of $87 million.

Leadership was excited with the results.

“CrowdStrike kicked off the new fiscal year with strong momentum and delivered outstanding first quarter results that exceeded our expectations,” Kurtz noted.

Management went on to increase FY 2022 guidance, now expecting revenues to land within a range of $1.347 billion to $1.3657 billion.

As for the upcoming quarter, leadership is expecting Q2 revenues to land within a range of $318.3 million to $324.4 million and for non-GAAP net income to land within a range of $26.3 million to $30.7 million.

Investigating the balance sheet the numbers are solid.

Total Debt: $738 Million

Total Liabilities: $2.032 Billion

Total Assets: $2.881 Billion

Cash & Short Term Inv: $1.68 Billion

On a valuation basis, CrowdStrike does trade at a premium.

Forward Price to Earnings: 370.81x

Price to Sales: 58.93x

Price to Book: 69.07x

Management has room to be more effective.

Return on Equity: -19.79%

Return on Assets: -7.10%

Return on Invested Capital: -10.94%

Given the numbers the analysts are bullish with a mean price target of $267.26/share, representing a 2.09% upside.

The high price target is $302.00/share, representing a 15.36% gain, while the low price target is $220.00/share, representing a -15.96% downside.

The big money is quite involved with 67.87% of CrowdStrike being owned by institutions. Top holders include The Vanguard Group, Tiger Global Management, and T. Rowe Price Associates.

On a technical basis CrowdStrike is elevated. According to the six-month charts the MACD is moving with minimal downside momentum within a tight range around 11.17.

The six-month charts are also indicating an RSI of 65.01 and CCI of 97.05, both of which are on the high end.

Looking to the future, investors fear CrowdStrike is overvalued and that growth will slow down. Meanwhile the bulls believe market demand will only increase given recent cyber attacks and that CrowdStrike will maintain its steady growth for years to come.

In short, CrowdStrike ($CRWD) is a solid company that boasts expanding revenues, strong customer growth, improving margins, a reliable management team, balanced finances, and a growing market to accelerate within.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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