What happened
Shares of CrowdStrike (CRWD +1.41%) were trading higher on Monday. The cloud-based cybersecurity specialist jumped as much as 3.2% in early trading and were still up 2.3% as of 12:53 p.m. ET.
Investors were relieved to get clarity about the company's banking relationships, which were in focus as the week began.
NASDAQ: CRWD
Key Data Points
So what
The collapse of Silicon Valley Bank (SVB), a subsidiary of SVB Financial Group, has had investors running for cover and reviewing regulatory filings to see which technology companies might be exposed. A quick perusal of CrowdStrike's annual report reveals a banking relationship with SVB, but things weren't as bad as investors had feared.
Citi analyst Fatima Boolani scoured a number of North American software providers for exposure to SVB after the Federal Deposit Insurance Corp. (FDIC) takeover of SVB last week. The analyst noted that SVB was the "lender of choice for most of the high-tech and enterprise software" companies.
The research revealed that CrowdStrike indicated that 10% of its funds were exposed, but the analyst suggested the exposure "doesn't seem all that concerning," as it largely involves the company's revolving credit line.
Now what
The news got even better for CrowdStrike shareholders. Over the weekend, Treasury Secretary Janet Yellen, Federal Reserve Board Chair Jerome Powell, and FDIC Chair Martin Gruenberg released a joint statement saying the FDIC would "fully protect all depositors" of SVB, invoking a "systemic risk exception." This means that both insured and uninsured deposits will be guaranteed by government regulators.
While investors welcomed this news, there are plenty of other reasons to like CrowdStrike. Just last week, the company reported its financial results, which were remarkably robust -- particularly given the macroeconomic headwinds.
For CrowdStrike's fiscal 2023 fourth quarter (which ended Jan. 31), revenue grew 48% year over year to $637 million. CrowdStrike also generated net new annual recurring revenue of $222 million, bringing the total to $2.56 billion, up 48%. While its losses continued, the company generated record operating cash flow and record free cash flow of $273 million and $209 million, respectively, which suggests profits are merely a matter of time.
For those reasons and more, CrowdStrike stock is a buy.
