What happened
Shares of CrowdStrike (CRWD -0.65%) climbed 14% in February, according to data provided by S&P Global Market Intelligence, thanks to momentum in the cybersecurity industry and positive coverage from analysts. Investors focused on evidence of strong demand for CrowdStrike's products, anticipating the strong results that the company would publish in its quarterly earnings report.
So what
February was a quiet month for CrowdStrike headlines. The company announced it had received top ratings from Gartner and IDC for its endpoint security products. These are important honors, but CrowdStrike was already considered a leader by industry publications. The stock also benefited from a bullish analyst report from a high-profile investment bank that increased its price target. These factors both contributed to investor optimism, but they're not enough to explain the 14% jump.
Most of CrowdStrike's performance can be attributed to cybersecurity industry momentum ahead of its March 7 quarterly earnings report. CloudFlare and Palo Alto Networks both popped when they published positive financial reports. In both cases, CrowdStrike's shares were also pulled upward.
CRWD, NET, PANW Total Return Level data by YCharts
Investors are worried about slowing growth and shrinking profit margins right now. High interest rates, a poor macroeconomic outlook, and concerning corporate earnings reports all contribute to investor jitters and a general shift toward lower risk tolerance. Most of the popular cybersecurity companies are growth stocks with subscription models. Whether they are competitors or complementary products, they have the same general set of operational catalysts. When CloudFlare and Palo Alto Networks provided relatively positive commentary on demand and growth outlook, it represented bullish news for CrowdStrike, too. Investors turned to the endpoint security leader, hoping to get ahead of the trend leading up to its upcoming earnings report.
Image source: Getty Images.
Now what
CrowdStrike reported fourth-quarter results on March 7, achieving 48% revenue growth and record free cash flow. These results were modestly ahead of Wall Street's expectations. CrowdStrike's outlook for next year was also strong, with the company forecasting more than 30% growth in revenue and adjusted earnings. This data generally confirms the optimism generated by CrowdStrike's industry peers in February, and the stock bounced higher following the report.
The stock's forward P/E ratio is close to 70 now, which is sensible, given the expected earnings growth rate. The stock can't be considered cheap right now, and it could be subject to volatility if the market endures another downturn in 2023. However, it's still well below its previous highs, and it remains a compelling long-term opportunity for growth investors.
