For a company that has only been publicly traded for a year, CrowdStrike (NASDAQ:CRWD) has really made a name for itself among market participants. CRWD stock is red-hot and shows hardly any signs of slowing down.
It’s possible that some of the buying activity in CrowdStrike stock is related to the work-from-home trend. With so many people and businesses working on computers, the need for cybersecurity solutions is readily apparent.
While that’s an important consideration, there have been other contributing factors to CrowdStrike’s rapid rise to prominence. The company’s integration of artificial intelligence (AI) and cloud computing have proved to be highly advantageous, as well.
There are two sides to every story, though. Value-focused investors could construct an argument that CrowdStrike stock has run too far, too fast. They might contend that it’s better to wait until this overheated stock cools down a bit.
And so, investors must decide whether CRWD shares are a bargain at the current price point. They certainly could be if there’s room for long-term growth with CrowdStrike.
A Closer Look at CRWD Stock
Admittedly, it’s not encouraging that the trailing 12-month earnings per share for CrowdStrike stock is -$0.71. Generally, value-oriented investors would prefer to see a positive number.
Momentum-focused traders will be glad to know that the bulls are firmly in control of CrowdStrike stock. Indeed, the share price rocketed from its 52-week low of $31.95 in March to $113.20 at the end of July.
With the stock trading not very far from its all-time high price, concerns could be raised about an imminent pullback. After all, the buying frenzy can’t last forever and the stock might be due for a retracement.
That’s a valid point and it’s not unreasonable to wait for a pullback before buying CRWD shares. Alternatively, if you believe that the company will continue to prosper and generate revenues, then you can start accumulating the shares and buy more of them if the price dips.
Better Tech for Better Security
What CrowdStrike offers is more than the typical cybersecurity reporting and protection you’ll get from other companies. What makes a big difference is that CrowdStrike provides what it refers to as cloud-scale AI.
The idea is that CrowdStrike’s technology actually gets “smarter” as it takes in more data. Thus, while other companies might struggle with information overload or “analysis paralysis,” Crowdstrike’s technology thrives off of the data buildup.
Moreover, the company’s data is hosted in the cloud, which offers a number of advantages. As the company points out, being “cloud native” provides constant protection with data access, continuous learning through data analysis, as well as enhanced efficiency through data reuse.
Growing by Leaps and Bounds
CrowdStrike claims “Continuous AI analytics on over 3 trillion events streamed to [its] Threat Graph per week.” That’s a whole lot of events to handle, but it appears that CrowdStrike’s clientele is generally satisfied with the company’s ability to execute.
As evidence of this, note CrowdStrike’s year-over-year growth in subscription customers: 176% for fiscal year 2018, 103% for FY 2019, 116% for FY 2020, and 105% for the first quarter of FY 2021.
With that growth trajectory, the company is clearly doing something right. Plus, this rate of expansion could provide a justification for the elevated CrowdStrike stock price.
Let’s also bear in mind that CrowdStrike has some very high-profile clients. As of Jan. 31, these included 49 Fortune 100 companies as well as 11 of the top 20 banks.
The Bottom Line
So (if you’ll excuse the pun), is CrowdStrike stock a “crowded” trade? The price action would suggest that it is. However, this doesn’t mean that the stock is going to crash. With CrowdStrike firmly in growth mode, there’s still room for upside in the months ahead.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.