It feels bad to sell too early if you’re in a winning trade. That was my experience with CrowdStrike (NASDAQ:CRWD) as I unloaded shares at $140. CRWD stock then proceeded to trend much higher, exceeding even my most lofty expectations.
There has been a drastic shift in opportunity for the company as the pandemic’s early days subside. This is why they say a large portion of the success in investing has to do with psychology.
I want to take a fresh look at CRWD stock today from a new perspective. It has had difficulty breaking through its high of $287. The stock would always quickly retrace after hitting this level, indicating weakness in buying momentum. The stock finally had a short breakdown late in November.
While I don’t think this is yet the optimal price for CRWD stock, investors should keep this one on their watch list and wait for a bottom.
Cyberattack Threat is Increasing
The threat of Cyberattacks has been increasing exponentially these past few years. This is especially true now, as so many aspect of our lives have moved entirely digital in response to the Covid-19 pandemic. Many people are now working from home rather than the office, connecting via the web and engaging in online entertainment like movies or games.
It could be a record-breaking year for security breaches. The frequency and scale of these breaches demonstrate the country’s vulnerability from cyberattacks.
Eva Velasquez, President and CEO of the Identity Theft Resource Center, said: “It’s also interesting to note that the 1,111 data breaches that the amount and quality of data being exfiltrated by hackers. from cyber-attacks so far, this year exceeds the total number of data compromises from all causes in 2020.”
Cyberattacks can be extremely costly. According to Cybersecurity Ventures, the costs of ransomware alone could potentially reach $265 billion in the next 10 years. These factors have increased the need for individuals and corporations to start protecting their digital assets.
CRWD Stock Has Plenty of Potential
CrowdStrike is one of the preeminent cybersecurity companies on the market today. The company’s Falcon platform was built from the ground up to protect against threats in the cloud era. The Falcon is a multi-tenant and cloud-native solution that could protect enterprises no matter where they work. Whether a company uses on-premise or cloud technology, CrowdStrike is able to defend its clients against cyberattacks.
Given the immense potential of the company, CRWD stock tends to trade at a large premium. The stock is trading at a trailing 12-month price-to-sales (P/S) ratio of 44x. Using forward earnings estimates, the stock is trading at a price-to-earnings (P/E) ratio of 277x. Neither of these valuation metrics indicate a cheap company, but you need to pay for quality in this frothy environment.
However, the large selloff could create some opportunity, and CRWD stock is a quality investment that a potential buyer should hold for a long time. The stock is currently 20% below its most recent high. There is a chance, though, that this selloff could continue.
If CRWD stock enters a down-trending channel, I wouldn’t be surprised to see it trade close to $180. This would be a 37% premium from even the most pessimistic analyst price target of $247. I continue to like CRWD stock and am waiting for an ideal point of entry.
On the date of publication, Joseph Nograles 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.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.