Shares of CrowdStrike (NASDAQ: CROWD)
traded higher Monday as cybersecurity is in the spotlight, following ransomware attacks on a meat producer, a pipeline, the Martha’s Vineyard ferry, and other prominent networks.
Even the White House press briefing room on Monday featured an appearance by National Security advisor Jake Sullivan, who addressed the ransomware attacks.
CrowdStrike, a cloud-based service providing comprehensive antivirus and threat management for network end users. The company offers not only incident responses, but also forensic analysis to determine whether a network breach occurred.
Last week, the company reported first-quarter fiscal 2022 earnings of $0.10 per share, beating analyst estimates of $0.06 per share. That marked a 400% increase from the year-ago quarter.
Revenue was $302.8 million, up 70% year-over-year, also topping views, which were pegged at $291.77 million.
The company is enjoying a number of tailwinds at the moment. These include the ransomware threat noted above, as well as increased adoption of cloud computing and corporations’ and government’s interest in heightened approaches to cyber protection, such as zero-trust security.
Across the board, cybersecurity firms are benefiting from the current environment. Large-cap stocks such as Fortinet (NASDAQ: FTNT) and McAfee (NASDAQ: MCFE), as well as smaller firms such as Identiv (NASDAQ: INVE) are at or near new highs.
However, CrowdStrike appears to have some unique advantages, when it comes to its capabilities. This could spur further growth in the not-so-distant future.
Strong Subscriber Growth
Analysts have a “buy” rating on the stock, with a price target of $240.76, representing an 11.41% upside.
Drilling down into the earnings report, subscriptions grew by 73%. This category comprises 93% of CrowdStrike’s total revenue. A smaller category, professional services, grew by 36%.
The total customer tally rose a remarkable 82% from the prior year.
One factor driving growth at CrowdStrike is “zero trust security,” a standard developed in 2010 that is increasingly being adopted.
According to CrowdStrike’s Web site, “Zero Trust is a security framework requiring all users, whether in or outside the organization’s network, to be authenticated, authorized, and continuously validated for security configuration and posture before being granted or keeping access to applications and data. Zero Trust assumes that there is no traditional network edge; networks can be local, in the cloud, or a combination or hybrid with resources anywhere as well as workers in any location.”
Increased adoption of the standard is a factor in CrowdStrike’s growing ranks of government customers.
In the earnings call, CEO George Kurtz said President Biden’s recent executive order on cybersecurity “lines up with our strategy, lines up with what we do. And I think, certainly, the federal government can benefit and has been benefiting from our technology.”
He added that a growing number of states and municipalities are also using CrowdStrike.
Consolidating Since February
The stock went public in 2015, meaning it’s well within the zone when a newly public company tends to notch its biggest price gains. Shares are up 115.61% over the past year, and 4.63% over the past month.
CrowdStrike is a large cap, with a market capitalization of $48.62 billion.
Its beta is 0.93, meaning it’s less volatile than the broader market. However, its price-to-earnings ratio of 609 may cause some investors to shudder and turn away. It’s not uncommon for fairly new growth stocks to have P/E ratios that seem excessive.
CrowdStrike began consolidating in February, below a high of $251.28. Its current pattern is somewhat sloppy and erratic, although the broader market has been choppy and many stocks are consolidating awkwardly.
Shares were trading about 4% higher late in Monday’s session. Turnover was 52% higher, for that time of day.
The stock recently hit resistance at around $225. If shares continue to travel higher, ideally in heavy volume, that could offer an early entry point. Watch for the broader market to also be on the rise when you purchase shares. That’s a good guideline any time you buy a stock, as three-quarters of equities tend to follow the market trend.
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