Is It Time to Buy CrowdStrike Stock?

CrowdStrike (NASDAQ: CRWD) outspoken Co-Founder and CEO George Kurtz went on the offensive during the latest quarterly conference call, and the market responded well. Thus, the largest endpoint-cybersecurity software provider's shares have maintained much of their 200%+ rise since 2023.

As CrowdStrike's unified platform competes in a very competitive security-software industry, Kurtz threw subtle shade at many cybersecurity colleagues in the latest earnings statement, including mentioning Palo Alto Networks (NASDAQ: PANW). (Palo Alto's CEO, Zscaler's (NASDAQ: ZS), and Cloudflare's co-founders and CEOs also discuss their counterparts' failures on quarterly investor calls.)

The audacity of cybersecurity leaders aside, CrowdStrike is still worth watching and investors might consider buying shares even as it trades near all-time highs.

All of the cybersecurity pure-play leaders (except the Magnificent Seven, which have several cybersecurity solutions) have been talking about "platforming" in the business. That's what?

Cybersecurity firms abound after years of fast-changing organizational security needs, driven by cloud computing and the pandemic. However, the leaders—CrowdStrike in endpoint security for laptops and other mobile devices, Palo Alto Networks and Fortinet (NASDAQ: FTNT) in older network security, and Zscaler in cloud-based network security—are looking to expand their offerings and offer more. Security teams can save time and improve results by consolidating vendors.

Consolidating the complex cybersecurity field by ousting smaller firms is true. At a low-teens percentage rate, the major four players have been growing revenues faster-than-industry-average for some time, which is remarkable. After achieving $3 billion in sales in its first year, CrowdStrike has stood out throughout the last five years.

CrowdStrike hasn't attracted many investors since its 2019 IPO, despite its rapid expansion. CrowdStrike had a GAAP loss until the second half of fiscal 2024 (the 12-month period ended in January 2024) Naturally, the corporation promised GAAP profitability. Positive and rising free cash flow (FCF) has long been its trend.

Despite this, many "value" investors have criticized high employee stock-based pay, which is omitted from FCF. Because it dilutes shareholders, stock-based compensation is concerning. Instead, CrowdStrike has scaled its business to profitability on all counts, which may please prospective stockholders. A increasing share count makes it difficult to argue that stock-based pay dilutes shareholders.

Profit indicators like this support a company's long-term business strategy more than CrowdStrike's software technological boasting. To clarify, CrowdStrike has much to improve here. However, expanding its cybersecurity platform could boost profit margins.

Not all value investors will buy this expensive stock. CrowdStrike trades at 80 times this year's estimated GAAP earned per share and 60 times next year's early estimate. For long-term investors, CrowdStrike has a lot to like, with the company expected to raise revenue by 30% in 2024. I nibbled more of this stock and will keep an eye on it.

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