Given its muted moves in recent months, I can see why some may believe CrowdStrike (NASDAQ:CRWD) has topped. After rising over 111% over the past twelve months, and much more than that since the start of the Covid-19 pandemic, CRWD stock has peaked in price. Right?
Not so fast.
Yes, demand growth for network security services may come in at a slower pace going forward. There probably won’t be another surge in demand as intense as the one seen with the move to remote work in 2020.
But to say demand will cool to the point where it knocks CrowdStrike sharply lower? That’s the wrong take.
Elevated demand for cybersecurity will carry on in a post-Covid environment. Remote work trends, plus growing ransomware risks attest to this. In turn, the cloud-based provider of endpoint security services will continue to see above-average revenue and earnings growth.
As this plays out, shares will continue moving in a positive direction. In short, it’s too early to call it quits if you own it. If you don’t own it yet? It’s not too late to enter a position. It may be worth it to take advantage of its latest pullback in price.
Accessing CRWD Stock’s Recent Performance
After the big moves it made in 2020, and through early 2021, CrowdStrike shares have endured a much choppier ride. In the past 2 months, shares have pulled back, then popped again.
First, investors in CRWD stock “sold the news,” after the company announced strong quarterly earnings results. Then, as various overarching uncertainties made many investors skittish, growth stocks like CrowdStrike experienced volatility from late September to early October.
After that, shares bolted higher once again. This time news of the company’s plans to expand the reach of its Falcon platform helped drive CRWD stock higher. Through Falcon, the company plans to provide what’s known as extended detection response technology, or XDR, services.
Investors reacted positively, as it underscored its status as an innovator in the cybersecurity space. This, plus the stock market’s overall rebound in October, enabled it to pop back up above $275 per share.
That said, in recent days, this has started to reverse once again. Mostly, due to a recent analyst downgrade. However, while one analyst on the sell-side has become more bearish on it, that doesn’t mean you have to be bearish too.
In fact, the fear, uncertainty and doubt (FUD) stemming from this rating could open up an opportunity to initiate or add to a position.
Concerns About Rising Competition Are Overblown
On Nov. 1, BTIG Securities’ Gray Powell downgraded CRWD stock, from “buy,” to the equivalent of “hold.” The analyst cited increased competition in the industry as the main rationale behind his rating cut. With competition heating up, Powell is concerned that the company’s growth will slow down considerably in 2022. This in turn will make it hard for the stock to sustain its current valuation.
Again, the market may be following Powell’s lead, taking on a more lukewarm view of the stock. But I wouldn’t say this is the right call. Between CrowdStrike’s move into XDR, and other product launches, such as the launch of Falcon Forensics on GovCloud, this company remains an innovator in the industry. With this, it stands a high chance of keeping rising competition at bay.
If you coupled this with the fact that demand for cybersecurity services remains high, then it’s clear that worries of a severe slowdown in its revenue and earnings growth may be overblown. If it continues to beat analyst expectations, which it has done consistently over the last few quarters, then there’s plenty in play to allow it to maintain its valuation.
It has the ability to add to its valuation as well. The crowd may be cooling on it right now, sending it back below $275 per share. But taking a wider look at the situation with competition, you may want to go against the grain.
The Verdict on CrowdStrike
While future gains with CrowdStrike could come at a slower pace than the gains seen in 2020 and early 2021, don’t take that to mean it’s time to walk away. With its position as an innovator in its industry, and the prospect of it seeing its revenue and earnings continue to grow at an above-average rate, I’ll say it again: It’s too early to throw in the towel with this high-quality cybersecurity company.
It may be experiencing some more near-term volatility today. But for investors taking a long-term approach with CRWD stock? That may mean the opportunity to lock down a position at a more favorable entry point.
On the date of publication, Louis Navellier had a long position in CRWD. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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