Cybersecurity technology company CrowdStrike (NASDAQ:CRWD) has given investors plenty to cheer about lately. CRWD stock has risen nearly 30% so far in 2021 and 78% over the past year.
That kind of growth has led many investors to question whether a slowdown is imminent. The good news is that it doesn’t appear to be. Despite the rapid price appreciation in CRWD stock, there’s likely quite a bit more in store.
A Closer Look at CRWD Stock
CrowdStrike has been in a sustained uptrend since March 2020 and doesn’t look to be slowing down. Of course, September has been a tough month for the markets, but this may present a buying opportunity. Currently, CRWD stock is sitting about 12% below its high of $289.24, which was made in late August.
Wall Street analysts are very bullish on the stock, which has 21 “buy” ratings with just one analyst saying to “underweight” shares, according to The Wall Street Journal. The average analyst price target for CRWD stock is $311.83, nearly 23% above the current price. The most bullish target is almost 34% higher, at $340. If either prediction holds true, investors will be happy.
According to my InvestorPlace colleague Mark Hake, it’s possible the $340 level could be exceeded. Hake utilizes a free cash flow yield model to predict that CRWD stock warrants a target price of $367.60 per share.
Hake notes that his focus on 2022 revenue projections likely led to his price target being on the high end of the spectrum. But he adds that, since CrowdStrike is a software as a service (SaaS) company, investors can expect a high degree of predictability in revenue, growth and free cash flow.
To sum up, CRWD stock is a relatively safe SaaS investment with a “buy” rating from nearly all of the analysts who cover it. So, to my mind, the question is not so much if shares will go higher but, rather, how high can they go.
Growth and More Growth
That strong sentiment surrounding CRWD stock is backed by solid fundamentals.
SaaS companies like CrowdStrike depend on recurring revenue for a significant portion of their business. They are judged by the relationships they establish, as well as their ability to grow their revenue base. Fortunately for CrowdStrike, the news is positive.
For the company’s fiscal second quarter, which ended in July, annual recurring revenue increased 70% on a year-over-year basis, hitting $1.34 billion. Of that, $150.6 million was newly added recurring revenue in the quarter. Total revenue also increased 70% over the same period a year ago to $337.7 billion.
Part of the reason the investment world is increasingly interested in CRWD stock is that this growth isn’t expected to slow down. The company said it expects revenue of between $1.39 billion to $1.41 billion for the full fiscal year, which would represent a nearly 60% increase over the prior year.
Now, CrowdStrike is experiencing some growing pains. The $50 million net loss it registered through the first half of 2020 swelled to $140 million in the same period in 2021. Yet, investors seem undeterred.
The Bottom Line on CRWD Stock
CrowdStrike utilizes its cloud-scale AI and continuous AI analytics to constantly improve its products and services. The company is a leader in a market that is large and growing, estimating its $36.5 billion total addressable market will increase to $43.6 billion by 2023, a compound annual growth rate of 9%.
CrowdStrike already counts nearly half of the Fortune 500 companies and 63 of the Fortune 100 as customers. It should be able to increase its revenues and other pertinent financial metrics as a result of its positioning.
Growth is expected to be strong, and investors should respond in kind by boosting shares of CRWD stock.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.”
