On March 9, CrowdStrike Holdings (CRWD 0.08%) released fourth-quarter earnings results that soundly beat analyst estimates and sent its stock soaring. Management painted a picture of a thriving business and provided solid guidance for the year ahead. Nevertheless, It's still down 28% from last November's all-time high.
Is now the time to jump in with both feet? Let's take a closer look.
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Recent earnings results beat expectations
CrowdStrike reported fourth-quarter (the period ending on Jan. 31) revenue of $431 million, up 63% year over year. This figure beat expectations of $412 million and brought fiscal-year 2022 (12 months ending Jan. 31) revenue to $1.5 billion. Non-GAAP (adjusted) earnings for the fourth quarter were $0.30 per share, significantly above the consensus estimate of $0.20 per share, while earnings more than doubled from the year-ago figure of $0.13.
Behind these astounding numbers is a similarly alarming spike in cybercrime. RiskIQ reports that 281.5 million people were impacted by a data breach in 2021, with the collective costs to businesses rising to $1.8 million per minute. With everything from critical health infrastructure to small businesses at risk, there is considerable demand to protect cyber assets.
Moreover, the threat itself is rapidly evolving. Ransomware attacks -- malware that threatens to release sensitive data or block access to critical network services unless a ransom is paid -- have skyrocketed recently. Forbes reports that in 2018, the average ransomware payment was $7,000. That figure rose to more than $200,000 in 2021.
How CrowdStrike helps businesses stay secure
CrowdStrike's mission statement is simple and to the point: "We stop breaches." To this end, the company provides numerous cloud-based security modules on a software-as-a-service (Saas) subscription model. Its Falcon platform shields customers from cyberattacks through artificial intelligence and machine learning. Its various modules secure endpoints (e.g., desktops, laptops, mobile devices, tablets, servers), provide identity protection, and block unauthorized access to data.
CrowdStrike is leading a sea change in how companies protect their electronic systems and data. Companies are moving away from rules-based legacy software that targets known viruses or malware. In its place, they are adopting cloud-based solutions powered by artificial intelligence. Whereas legacy software detects malicious code by comparing it to a pre-loaded library, CrowdStrike's artificial intelligence can monitor whole networks, adapt to new threats, and alert administrators to suspicious activity in real-time.
Image source: Getty Images.
Subscriber growth accelerates
CrowdStrike's total subscriber base grew to 16,325 during the quarter -- with 1,638 added in the fourth quarter alone. This represents 65% year-over-year subscription growth. The company now boasts 15 of the top 20 banks as customers, as well as more than half of both the Fortune 100 and Fortune 500.
Moreover, the vast majority of these customers have bought multiple security modules from CrowdStrike. Over 69% of customers purchased four or more, and 57% purchased five or more.
Despite this impressive expansion in customers, there's still room for growth. Management estimates that in 2022 the total addressable market for cybersecurity is $54.8 billion. This figure is expected to rise to $67.1 billion by 2024. Wall Street analysts have taken notice. Average estimates point to 66% annual revenue growth over the next five years. Of the 32 analysts covering CrowdStrike, 29 rate the stock a strong buy or a buy.
Yet this optimism comes at a cost. CrowdStrike is not cheap. It trades at a price-to-sales ratio of nearly 32 -- expensive even for a high-growth tech stock. However, analysts expect the company to increase earnings to $1.09 per share this year and $1.60 next year. For investors seeking a growth stock in an otherwise challenging stock market, CrowdStrike looks like an intelligent choice.
