CrowdStrike (NASDAQ:CRWD), a cloud security company offering cybersecurity products and services to stop breaches, has seen its shares outperforming the Nasdaq as a whole in 2022, a great achievement considering the latest global financial uncertainty. Nasdaq has losses of nearly 13% year-to-date while CRWD stock is up 2%. Is there a reason for this momentum, or this is just a coincidence?
Well, successful investing is rarely about coincidences. There are a couple of big factors from this year that have helped the company and one big concern that still looms over it.
Cyberattack Worries
CrowdStrike’s CEO George Kurtz recently described the financial sector as being “on high alert” for cyberattacks amid Russia’s invasion of Ukraine. CrowdStrike could benefit from gaining new customers as Russia and Ukraine continue to make headlines.
The sanctions imposed by the West on Russia could find hackers fighting to attack financial institutions and media websites and spread fake news. This war is not just in person; it is a financial war and a war of misinformation, too.
There has been a notable transfer of capital to cryptocurrency exchanges lately as Russians have seen the cryptocurrency market as a way to move money out of their local banking system and people have made donations to support Ukraine in cryptocurrencies. An increase in crypto usage means an increase in cybersecurity attacks, and CrowdStrike could see a booming demand for its products.
Impressive CRWD Stock Performance
CrowdStrike recently reported its Q4 results, highlighting its growth and cash flow.
The company beat earnings projections by 10 cents, earning 30 cents per share in non-GAAP income, and beat revenue expectations by $18.6 million, making $431 million.
The cybersecurity firm achieved a “record net new ARR of $217 million with growth accelerating for the second consecutive quarter.” For the full year, revenue increased 65% to $1.7 billion, net cash generated from operations grew 61% to $575 million and free cash flow grew approximately 51% to $442 million.
On top of these, the number of subscription customers reached 16,325, an impressive year-over-growth of 65%.
CRWD Stock Isn’t Profitable Yet
It’s not all good news, though. CrowdStrike reported a wider GAAP net loss of $235 million, compared to $93 million the previous year. That’s a 153% increase in loss. GAAP loss from operations was $143 million, also widened compared to $93 million previously.
I am bearish on CRWD stock for two more important factors. First, slowing annual revenue growth is evident in the past three consecutive fiscal years.
Second, CrowdStrike has a considerable amount of debt — $740 million as of the end of the fiscal year — and that’s bad news in light of the Federal Reserve raising the interest rate.
CrowdStrike Holdings is giving now more reasons to be bearish than bullish. Focusing on top-line figures, its revenue is still not enough, as the bottom line shows consistent weakness. Avoid CRWD stock, as it is too far from achieving profitability.
On the date of publication, Stavros Georgiadis, CFA 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.
