Crime is an unfortunate and unavoidable fact of life, and protecting yourself, your family, and your property from it is a high priority for many. The same is true in technology, and because hackers and cybercrime will always be with us, companies are girding themselves with the tools needed to protect their businesses, their data, and their customers' privacy.
Increasingly, they're turning to CrowdStrike (CRWD 0.14%) for those tools. Its suite of products is viewed as the gold standard for the industry, providing comprehensive protection for endpoint, data, and identity security. As the industry leader, the competition is gunning for CrowdStrike, so let's look at three reasons you should buy this cybersecurity stock -- and one reason you might want to sell.
Image source: Getty Images.
1. A rapidly expanding opportunity
Last year was a record year for cybercrime and cybersecurity. The number of data breaches recorded by the Theft Research Center in 2021 surpassed 2020 by 17% at the end of September, with still three months to go in the year.
That seems to be translating into more customers for CrowdStrike, which added 1,600 net new customers in the third quarter and has seen its subscriber base rapidly widen from 450 clients to over 13,000 in less than five years. Its customers also stick around: It has a 98% renewal rate.
Further expansion is on the horizon. More companies are aware today that the continued rollout of 5G networks will offer not only more opportunities to connect devices to the cloud, but will also provide the needed access for hackers to bypass security protocols.
CrowdStrike estimates its total addressable market will reach $116 billion by 2025, and it just released cloud protection for MacOS and Linux systems, further expanding its potential base of customers.
Image source: Getty Images.
2. The Falcon platform
The Falcon architecture manages and monitors trillions of potentially adverse online events every week while providing customers with cost-effective personalization and customization solutions. Through the use of artificial intelligence and machine learning, the platform grows smarter as time progresses, allowing it to recognize and respond to potential threats faster. Because it was purposely built in and for the cloud, Falcon is often the more effective and cheaper cybersecurity solution than on-premises security products.
It offers one of the most comprehensive zero-trust platforms in the industry, meaning all users must be authenticated, authorized, and validated before gaining access to applications and data.
Under multiple testing protocols from third-party labs, Falcon detected 100% of the attacks against a system with near-perfect accuracy while protecting the system from the attack.
3. It's worth the premium
CrowdStrike has doubled revenue every year since its 2019 IPO, although some of the growth was gained due to acquisitions. Wall Street forecasts revenue will double again by 2023 and then double once more to $4 billion by 2025. The cybersecurity giant also generates sizable free cash flow, and analysts expect it to grow 500% over the next few years to hit more than $1.1 billion.
By traditional metrics, CrowdStrike is expensive, and even with the stock down 40% from its November highs, it's still not "cheap" with a price-to-sales ratio of 30. Yet being at the forefront of a rapidly expanding market where it is growing even faster, I think CrowdStrike is worth the price. In fact, the big drop in valuation puts it at an attractive level to buy.
Image source: Getty Images.
Why you might want to sell
As dominant as CrowdStrike is, the cybersecurity field is crowded and getting even more so. While that underscores the opportunity that's available, it also means there are greater opportunities for rivals to take down the leader.
SentinelOne (S -0.10%), for example, just went public last June and its revenue is expanding even faster than CrowdStrike's, rising 128% in the third quarter, with its own annualized recurring revenue jumping 131%. It also contends that in some cases, its Singularity platform is more accurate in detecting threats and is faster than CrowdStrike and former industry leader McAfee.
There could come a time when "the rising tide lifting all boats" means CrowdStrike isn't the standout leader it is today.
