No tech stock investor needs to be reminded of just how awful the sector has been. As the market transitioned to more defensive consumer staples due to rising interest rates, rampant inflation, and a stagnating economy, many previously high-flying tech stocks tumbled from their highs.

CrowdStrike (CRWD 0.32%) stock is down 31% from its November peak as the market rotated out of the sector, but business for the cybersecurity stock remains robust, which could be why it has bounced sharply higher off its lows.

Yet, with the Federal Reserve signaling it will take an aggressively hawkish stance on inflation -- St. Louis Fed president James Bullard says it's "fantasy" to think anything short of dramatic interest rate hikes that bring economic growth to a standstill will work -- the prospects of a recession may dent enthusiasm for CrowdStrike's cybersecurity solutions as even slow growth might make businesses hesitate to spend money. So, is it too late to buy this stock?

Gloved hands typing on a computer keyboard.

Image source: Getty Images.

Target-rich environment

Last year was a record for security breaches, which surpassed 2020's record year by 23%, according to Identity Theft Resource Center (ITRC), and it's looking like 2022 is on track to exceed that number.

The ITRC says the more than 400 compromised databases were reported in the first quarter, 14% ahead of the year-ago figure. What's worse is the organization's president and CEO Eva Velasquez says the first quarter of a year is typically the lowest period for reported incidents.

If you need a silver lining, though, the number of victims was cut in half from last year, so hackers are hacking fewer victims but apparently hitting them repeatedly.

That bodes well for cybersecurity stocks like CrowdStrike because, much like death and taxes, cyberattacks are now part of our daily existence. So, while companies might want to cut back on capital expenditures if the economy sours, cybersecurity is no longer a luxury expense. It has become a necessity.

A ready threat response

CrowdStrike uses sophisticated machine learning, artificial intelligence, and behavioral analysis to detect and thwart cybersecurity risks. Its top-rated Falcon platform monitors approximately six trillion events each week while affording customers the opportunity to dial in the protection they need through cost-effective personalization and customization solutions.

Falcon was built in the cloud, so it's often a more effective and cheaper cybersecurity solution than on-premises security products. And because the platform grows smarter as time progresses, it can recognize and respond to potential threats more quickly.

In less than five years, CrowdStrike's subscriber count has catapulted from 450 to more than 16,325, and 98% renew their subscriptions.

YOY Growth

FY 2020

FY 2021

FY 2022

Total Revenue

89%

74%

66%

Subscription Revenue

90%

77%

69%

Annual Recurring Revenue

92%

75%

65%

Data source: CrowdStrike annual SEC reports. YOY = year over year.

While no business can maintain a torrid pace of growth, CrowdStrike is proving nimble enough despite the increase in competition for cybersecurity services.

Everything is online

There are a number of reasons why businesses continue to respond to CrowdStrike's offerings, aside from the obvious need to protect against attacks.

Data continues to migrate to the cloud as more companies adopt digital and cloud-based solutions to enable a dispersed workforce to tap into their networks. Moreover, the rollout of 5G networks means the Internet of Things will see an even greater number of devices, appliances, and more tap into the online world, opening up new opportunities for security breaches.

That's why CrowdStrike's customization is key as customers can buy just the protection they need. The company says subscription customers who have adopted four or more modules, five or more modules, and six or more modules increased to 69%, 57%, and 34%, respectively, at the end of its fiscal year (Jan. 31).

Padlock and chain on computer keyboard.

Image source: Getty Images.

So, is it too late to buy CrowdStrike?

The problem with highfliers is, well, they've flown beyond reasonable valuations, making them ripe to be knocked down. CrowdStrike was just such a case, and by traditional metrics, it's still premium priced.

Shares go for 34 times sales, over 100 times the free cash flow it produces, and it's still producing generally accepted accounting principles (GAAP) losses. Though, on an adjusted basis, profits soared nearly 150% to $0.67 per share for the year. And analysts have high hopes for the future.

Sales are expected to triple over the next five years while per-share profits are expected to increase fivefold.

It stands to reason the stock price that has taken a breather in 2022 from the meteoric trajectory it was on will resume that upward trend. It may not be the rocket ride it was, and investors might not even catch the bottom buying in right now, but with cybercrime a growing threat, CrowdStrike looks like a long-term winner for your portfolio.