- The cycling back into tech stocks has helped to send CrowdStrike (CRWD) stock higher over the past month.
- There has been another catalyst, related more to its business, that has been a driver as well.
- Despite concerns this rebound will fade, shares could continue to bounce back.
As has been the case with scores of hard-hit tech stocks, CrowdStrike (NASDAQ:CRWD) has rallied since March. In the past month alone, CRWD stock is up around 31.75%.
But given that this cybersecurity company’s shares have bounced back so much over such a short timeframe? I can see why you may be concerned this rally will soon fade/reverse.
However, keep two things in mind. First, it’s possible that the Federal Reserve’s tightening plan isn’t bad news for this tech stock. There may be a path for its recovery to continue. Even if at a more moderate pace.
Second, there’s another factor, beyond the shifting back of sentiment for tech, that’s played a role in this particular tech stock’s rebound. This factor may not continue to help it rally, yet something related to it could. In short, there’s enough to suggest shares stay on their current trajectory.
The Latest Possible Headwind to CRWD Stock
The Federal Reserve is currently in the process of raising interest rates, in order to combat inflation. It may seem counter-intuitive, but this by itself may not be a negative for tech/growth stocks like CrowdStrike. Why?
On several occasions in the past, Fed tightening has resulted in a cycling back into growth, enabling growth stocks to outperform value stocks. Some market analysts, like strategists at RBC, have pointed this out, as a possible explanation as to why growth has performed so well lately.
That said, much of this analysis buys into the “soft landing” narrative. In other words, the Fed’s view that it can raise interest rates in a way that prevents an economic slowdown or recession (i.e., a “hard landing”). The issue? Concerns are rising this isn’t how it will turn out. Instead, many are worried that we’ll see a hard landing instead.
You may have the same view. In turn, you may believe that an economic slowdown/recession will have a negative impact on the price of CRWD stock. Mainly, because such conditions could make it difficult for this cybersecurity firm to maintain its current rate of growth. Yet I wouldn’t immediately jump to that conclusion.
Demand and Growth for CrowdStrike’s Platform Is Robust
Above, I hinted that there’s a second catalyst at play driving CrowdStrike’s bounce back since last month. That would be the growing perception that, on the heels of Russia possibly retaliating against economic sanctions placed upon it due to its invasion of Ukraine via cyber attacks, demand for cybersecurity services could see a boost.
Like I argued when talking about another cybersecurity stock, Cloudflare (NYSE:NET), it’s not certain the recent geopolitical troubles will give cybersecurity demand another boost. But given how robust demand is already? The Russia factor is not something that makes or breaks the bull case here.
Elevated demand for endpoint security services is already set to remain strong. Demand for it is not something that’s going away after the pandemic. It’s not something that’s going to see slackening demand, in the event there’s an economic downturn.
With this, it’ll likely continue to deliver strong results. Although its own guidance calls for a slowdown in revenue growth over the next fiscal year, this moderate slow down is more than accounted for in today’s valuation. Also keep in mind that analysts expect its earnings to rise significantly over the next few years.
The Verdict on CRWD Stock
Earning a “B” rating in my Portfolio Grader, I’m not saying that the rest of CrowdStrike’s recovery is going to play out as quickly as this initial leg. But while external factors like changes in Fed policy could slow down its complete comeback, don’t be concerned that this factor will derail it.
If the Fed pulls off a “soft landing,” tech stands to perform well. It has done so several times when the central bank has raised rates. Even if a “hard landing” or something more intense than a “soft landing” happens? This may not derail CrowdStrike, either.
Belt-tightening by enterprise IT users doesn’t mean they’ll cut corners with cybersecurity spend. The company could continue to deliver growth in-line, or perhaps above, expectations.
Despite its already substantial price recovery, it isn’t too late to consider a position in CRWD stock.
On the date of publication, Louis Navellier had a long position in NET. 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.