What happened
Shares of cybersecurity company CrowdStrike Holdings (CRWD 0.14%) were up 13.7% in March, according to data provided by S&P Global Market Intelligence. The company reported strong financial results during the month, which was followed by bullish commentary from prominent analysts, leading to the stock's outperformance during March.
So what
On March 7, CrowdStrike reported financial results for the fourth quarter of its fiscal 2023. The company's Q4 revenue and profitability were better than what analysts expected. And results were ahead of management's own guidance as well.
On March 8, analysts came out of the woodwork upgrading their outlooks on CrowdStrike stock. For example, UBS analyst Roger Boyd raised his price target for CrowdStrike stock from $150 per share to $165 per share, saying Q4 financial results were "a step in the right direction," according to The Fly.
For context, most analysts had downgraded CrowdStrike stock back in November after it reported fiscal third-quarter results. Wall Street was worried about a slowing growth rate for the company's annual recurring revenue (ARR). However, in Q4, it added record net new ARR of $222 million, a substantial jump from the net new ARR of $198 million it had added in the previous quarter.
In other words, CrowdStrike added new customers, and existing customers increased their spending commitments, adding to the company's subscription revenue. And that's likely what Boyd had in mind by saying "a step in the right direction."
On March 9, CrowdStrike's management participated in the Morgan Stanley Technology, Media & Telecom Conference. These events don't really present new information. But it was a good chance for investors to hear management talk and add color to previous announcement, like CrowdStrike's partnership with Dell Technologies. And hearing about future growth opportunities was another reason for investors' bullishness during March.
Now what
For fiscal 2024 (which started in February), CrowdStrike's management is predicting record revenue and record adjusted profitability yet again. Its growth rate is slowing. Revenue was up 54% year over year in fiscal 2023, compared to expected growth of around 34%, at best, in fiscal 2024. However, 34% top-line growth is still quite strong.
Another strength for CrowdStrike going forward is its balance sheet. The company has a net cash position of around $2 billion, which management is hoping to opportunistically use to acquire other companies at attractive valuations, among other things.
Cybersecurity remains a huge growth sector and looks to remain that way for years to come. CrowdStrike's financial results don't always impress the market. But it's consistently capturing more of the opportunity and is well positioned to keep doing so in the future, making this a stock worth investing in.
