With cybersecurity becoming even more important in the years ahead, CrowdStrike (CRWD 0.81%) is poised to grab more market share. In this video clip from "The Rank" on Motley Fool Live, recorded on March 21, Fool.com contributors Matt Frankel, Connor Allen, and Jason Hall discuss the growth potential for the leader in cloud-based cybersecurity.
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Matt Frankel: I think the market is missing CrowdStrike's opportunity, even at its lofty valuation right now. CrowdStrike sees a $55 billion market opportunity in cybersecurity today. The total cybersecurity market is about $165 billion including things that CrowdStrike doesn't do.
About a third of it, they see it as their addressable market opportunity. The cybersecurity market itself is growing very rapidly, roughly doubling in size every five years right now and this is not going to slow down anytime soon. Cybercriminals are not going to get any less sophisticated over time. The market's supposed to grow or expected to grow from $165 billion today to $366 billion by 2028. That's well within our 10-15 year time horizon.
CrowdStrike's growing rapidly. Their annual recurring revenue is growing at a 67% annual rate and it's accelerating. It's not just maintaining, it's accelerating its growth. The business's great margin, 74% gross margin that has scaled should translate into incredible profitability. This is just going to be a huge market opportunity and CrowdStrike is a product that gets even stronger as it gets bigger.
The whole name comes from the fact that it crowdsources its threat data and as it detects threats in its network, it uses that information to make the product stronger. I just see them having a huge competitive advantage going forward. They're already the leader in cloud-based cybersecurity. I think this is a very under-looked trillion-dollar market opportunity for just CrowdStrike alone. Guys.
Connor Allen: When I was ranking these, I think I ranked CrowdStrike a little lower than I probably should have. That's the thing about all these companies is, I think all of these definitely have potential to 10x, and that's the difficult thing about ranking them, is that CrowdStrike is a company that I love. I ranked it a little bit lower than the others, but it's not because I don't like CrowdStrike, it's just because I might like the others a little bit more for other reasons. I totally agree with you on this one, Matt, I don't know if Jason wants to take the bear case here.
Jason Hall: I think the bear case doesn't execute as well as we expect. We see more consolidation in the industry and that consolidation makes it harder for CrowdStrike, which they focus on the endpoint. Maybe they stay focused on just focusing on the endpoints and we see somebody else do a lot of consolidation that makes it harder for CrowdStrike to compete.
But I think maybe CrowdStrike is probably the one that would be a buyer, to be honest with you. I think with the exception of GM, that I really struggle to see as a 10xer from here, I think all of the stocks that were out of my top three, I can make a case for having ranked every single one of them higher and I ranked this fourth, so I'm very bullish.
