Computers, phones, and the internet connect nearly everyone. Unfortunately, some dangerous people with ill intentions are among the users. That means the service that provides you videos, social interaction, and stock investment advice can also be hazardous. To protect from dangerous cyber threats, consumers and businesses alike turn to different forms of cybersecurity software.
These precautions are necessary, as the results of an intrusion can be catastrophic. For consumers, cybercriminals can steal credit card data or compromise personal information like date of birth or Social Security number. On the business side, IBM found the average cost of a data breach for a company was $4.24 million in 2021, up 10% from 2020.
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With hefty costs associated with a cyberattack, it makes sense for everyone to have a cybersecurity platform. Typical guidelines urge companies to spend about 10%-15% of their IT budget on cybersecurity. It's likely there are plenty of companies out there not doing enough (see the Colonial Pipeline cyberattack or SolarWinds hack for recent examples). But companies are waking up and taking their cybersecurity solutions more seriously.
Cybersecurity's necessity makes it a fantastic place to invest since companies are unlikely to cut the budget during tough times. One niche I think is a great place to start is endpoint protection. Endpoint protection secures devices like desktops, laptops, or phones from malware or device takeover threats. Even though it is second place in global market share, my top pick for this space is CrowdStrike (CRWD 3.63%).
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Top market share holder Trend Micro (TMIC.Y 0.15%) is based out of Japan and is a legacy cybersecurity provider working to transition to the modern cloud business environment. Its big difference from CrowdStrike is that CrowdStrike was built from the ground up as a cloud-based offering. Additionally, Crowdstrike is growing its revenue significantly faster than Trend Micro.
| Company | Latest Full Fiscal Year Revenue Growth |
|---|---|
| CrowdStrike | 66% |
| Trend Micro | 9.4% |
Source: CrowdStrike and Trend Micro. Numbers are from CrowdStrike's FY 2022 (ending Jan. 31, 2022) and Trend Micro's FY 2021 (ending Dec. 31, 2021).
Trend Micro also has a consumer-facing product while CrowdStrike does not. Because CrowdStrike's pricing requires a minimum purchase of five seats, most consumers will never use its software. However, CrowdStrike could easily extend its solution by dropping this baseline or creating a new offering targeted directly at personal security. This transition would open up a massive growth opportunity, but CrowdStrike doesn't need any help in the growth department at its current pace.
Throughout fiscal year 2022, CrowdStrike's customer base grew by 65% to 16,325 and had 65 of the Fortune 100 on its platform. While it has captured more than half of the top businesses, CrowdStrike's dollar-based net retention rate (a metric that measures how much more an existing customer spends from one period to the next) was 124% for the fourth quarter, meaning customers spent $1.24 in Q4 for every $1.00 spent in 2021's Q4.
CrowdStrike has more than 20 endpoint protection modules ranging from malware search to identity threat detection, giving customers the tools they need to offer a robust cybersecurity offering. With 69% of customers using four or more modules and only 34% using six or more, its customers have plenty of room to expand within CrowdStrike's product line.
To further underscore CrowdStrike's offering, Gartner named CrowdStrike a leader in its endpoint protection magic quadrant. It scored the highest on completeness of vision and was barely beat out by Microsoft in its ability to execute. However, these two providers were significantly ahead of any other endpoint protection providers.
CrowdStrike has a vast market to capture; growth investors should take advantage of this top cybersecurity business by picking up shares today.
