Crowdstrike (NASDAQ:CRWD) stock rose after reporting solid earnings for the second quarter.
The company cut its quarterly loss to $49 million, 21 cents a share, on revenue of $535 million. Revenue was up 58% over the previous year. The company expects recurring revenue to be up 59% for the year at $2.14 billion.
The numbers all beat analyst estimates. Crowdstrike raised its guidance on non-generally accepted accounting principles (GAAP) net income for fiscal 2023 to 30 cents – 32 cents a share. The non-GAAP number excludes stock-based compensation and amortization.
CRWD Stock: Time to Strike?
Crowdstrike is a cybersecurity company specializing in cloud workloads. It was founded in 2011 and moved from Silicon Valley to Austin, Texas last year.
CEO George Kurtz regularly travels to Israel in search of companies CRWD can buy with stock. Regular losses and high salaries are considered the price of leadership. Failure to maintain leadership is punished severely by the company.
Cybersecurity is considered a great long-term play, even by the meme-trading crowd. Crowdstrike is the second most valuable company in the space, behind Palo Alto Networks (NASDAQ:PANW), which is worth $55 billion. A reputation for leading-edge technology leads to trading at huge multiples to revenue. Crowdstrike currently trades for about 28 times revenue. As international tensions rise, so does interest in the group.
Crowdstrike earnings caused analysts to raise their price targets to a range of $217 to $236 a share. The stock was expected to open near $195, a market capitalization of $45 billion. Shares are down 5.6% on the year, but that handily beats the average NASDAQ loss of 25%. Chartmill shows 37 analysts following the stock, with 87% telling clients to buy it.
There are Crowdstrike bears, concerned about the high multiples. Joule Financial founder Quint Tatro believes the company is overvalued at 100 times forward earnings.
What Happens Next?
While Crowdstrike is down 32% in the last year, it’s up 63% over the last two years, four times the gain of the average Nasdaq stock. If you bought Crowdstrike at the time of its 2019 initial public offering (or IPO) you’re up 200%.
The big risk is that Crowdstrike fails to keep investing and is passed by a hotter approach.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
