Buy the Dip in Cybersecurity Juggernaut CrowdStrike

This past year was rough for growth stocks. Supply-chain constraints pushed inflation rates to new highs, prompting the U.S. Federal Reserve to be hawkish. These factors led to a broad market selloff, impacting richly valued stocks. Cybersecurity giant CrowdStrike (NASDAQ:CRWD) also got caught in the fray despite its mind-boggling numbers. But now the market selloff presents a highly attractive opportunity to buy CRWD stock.

A sign with the Crowdstrike (CRWD) company logo
Source: VDB Photos / Shutterstock.com

CrowdStrike is a cloud-native endpoint security specialist that has grown its top-line every quarter since going public. The company has been rapidly expanding its addressable market and security modules to cater to several different businesses. Plus, with cybersecurity being a continuous challenge for companies moving forward, CrowdStrike will only move from strength to strength for the foreseeable future.

Here’s what you should know about CRWD stock moving forward.

CRWD Stock: A Solid Performer

CrowdStrike has been a stellar performer and has generated consistent revenue growth. In fact, the company’s five-year revenue growth averages in at a whopping 99%. The company’s gross margins have also risen at an incredible pace, averaging at 60% for the past five years.

CRWD has several unique competitive advantages, making it the gold standard in cloud security. With its cloud-native platform, users can sidestep the need for expensive on-site security infrastructure. Further, CrowdStrike can effectively use the data from its range of protected devices to prevent some of the most complicated attacks. This company offers a range of cybersecurity solutions resting on artificial intelligence (AI) and provides a lot more automation than some of its peers. That helps drive down costs and makes it incredibly user-friendly.

Naturally, these advantages have been reflected in CrowdStrike’s results, which continue to amaze CRWD stock investors. In the most recent quarter, revenues grew 63% year-over-year (YOY). What’s more, with most of sales coming from subscriptions, gross margins have grown at a similar trajectory.

That said, CrowdStrike isn’t profitable at this stage. It is, however, cash flow positive. For the recent third quarter, it had a free cash flow (FCF) margin of 32%. The free cash flow balance was $123.5 million in Q3. The company also had a healthy $1.91 billion in its cash till.

Incredible Outlook Ahead

There’s little doubt about it: CrowdStrike has been consistently killing it across all growth metrics and will continue to do so for the foreseeable future.

Perhaps the most impressive number for the company is its revenue retention, which has hovered around 120% for the past few years. But that’s not all. The company’s customer count is increasing at a rapid clip as well. CRWD recently took that figure past 14,600 customers, marking a 75% YOY increase. Some 68% of customers purchased four or more modules, too.

These sparkling numbers have helped CrowdStrike achieve industry leadership status and gain multiple awards from GartnerForrester and others. These accolades have translated into sizeable gains for CRWD stock.

Moving forward, CrowdStrike’s revenue growth should normalize but will also continue to lift its underlying profitability. Management’s target operating model shows that the operating margin could exceed 20%. That seems plausible with the company’s current performance.

The Bottom Line on CrowdStrike

All told, CRWD stock is ripe for the picking after the broad-based market selloff. Although this pick of the cybersecurity names still trades at 28 times forward sales. That price-sales (P/S) number is at its lowest since 2020.

With such tremendous growth numbers, it’s tough to pass up on this cybersecurity leader. Buy CRWD stock while you still can at the current price.

On the date of publication, Muslim Farooque did not hold (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.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.


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