CrowdStrike Stock: Strong EPS Growth and FCF Record Highlight Growth Potential
Investors have been closely watching the cybersecurity industry this year, and although cybersecurity stocks have performed solidly, they have modestly underperformed the broader market. However, CrowdStrike (NASDAQ:CRWD), a leader in the Endpoint Protection Platform (EPP) market, stands out with its robust growth outlook, improving free cash flow, and attractive valuation compared to its peers.
CrowdStrike operates a 100% cloud-based architecture that offers advanced detection and remediation capabilities, positioning it to displace established players in the market. With a market capitalization of $35 billion and no dividend payout, CrowdStrike has been steadily growing its earnings per share and recently reported record free cash flow figures in its first quarter.
While its net new ARR (Annual Recurring Revenue) may have fallen slightly short in the first quarter, CrowdStrike delivered strong overall performance. The company’s gross and operating margins exceeded street expectations, and it experienced strong demand across all segments. These positive results led to an upward revision in its FY 2024 guidance.
However, there are some key risks to consider, including potential investor sensitivity to the growth multiple if a shift to value stocks occurs in the second half of the year. Additionally, softer adoption rates for CrowdStrike’s new service offerings and intense competition from strong competitors are factors that investors should monitor.
In terms of valuation, analysts at Bank of America project a sharp rise in earnings for CrowdStrike this year, with continued robust growth expected until 2026. Although the operating P/E ratio currently stands above 60, the company’s positive free cash flow and its expected steady increase in the coming quarters make its valuation reasonable.
Looking ahead, CrowdStrike’s chart demonstrates encouraging signs. After breaking out from a downtrend resistance line, the stock has established support and resistance levels to monitor. With an upcoming Q2 2024 earnings report in late August, the stock is poised for potential volatility.
To sum up the investment thesis, CrowdStrike presents an attractive growth opportunity with its promising outlook, favorable valuation relative to peers, and bullish chart pattern. While macro risks exist, the company’s strong fundamentals and room for growth position it for potential success in the cybersecurity industry.
In conclusion, CrowdStrike offers investors a compelling investment opportunity in the cybersecurity space. Its strong earnings per share growth, record free cash flow, and appealing valuation make it an attractive choice for those looking to gain exposure to the sector. With its advantageous position in the market and positive chart patterns, CrowdStrike is well-positioned for future success.
