CrowdStrike's (CRWD -1.43%) Falcon platform uses artificial intelligence (AI) to identify and fend off cyberattacks. Its success has already had a disruptive impact on the cybersecurity market which, in turn, helped deliver big wins for long-term shareholders. Spurred by strong business performance, the cybersecurity leader's share price is up more than 110% since its 2019 initial public offering. And yet, the stock is also trading down about 58% from its high, and it's seen volatile trading amid rising interest rates and other pressures.

What comes next for the cybersecurity leader? Read on for a look at characteristics and catalysts that could play key roles in shaping CrowdStrike's stock performance. 

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Green flag: Strong business and long-term demand outlook

At the close of fiscal 2023's fourth quarter (ended Jan. 31), CrowdStrike had more than 23,000 customers. The cybersecurity specialist's customer count was up 41% year over year, and it retained market leadership in the endpoint cybersecurity market.

CrowdStrike has also had great success expanding relationships with customers already using its software. CrowdStrike posted a net-revenue-retention rate of more than 125% in the fourth quarter, which means that existing customers spent 25.3% more on its services than in the prior-year period. The number of subscription customers using five or more, six or more, and seven or more modules on the Falcon platform grew 52%, 62%, and 75%, respectively, year over year.

Through expanding business relationships and new client additions, CrowdStrike grew sales by 54% last fiscal year, reaching $2.24 billion. The company also grew non-GAAP (adjusted) earnings per share by 130% to reach $1.54.

Crucially, it looks like the company's long-term growth story is just getting started. IoT Analytics estimates that there will be 27 billion connected Internet of Things devices in 2025, up from 14.4 billion in 2022, and growth for connected devices will mean increased demand for endpoint cybersecurity services.

In general, the long-term demand outlook looks very favorable for CrowdStrike. Cybersecurity is already something that businesses can't afford to skimp on, and the need for adaptive protection technologies will only increase as threats become more advanced and numerous. As the leading provider of endpoint cybersecurity software, CrowdStrike has fantastic industry positioning and incredible growth potential. 

Red flag: Growth-dependent valuation in a tough macroeconomic climate

While CrowdStrike generally served up fantastic business results over the last few years, some strong future performance is already priced into the company's stock. 

CRWD PE Ratio (Forward) Chart

CRWD PE Ratio (Forward) data by YCharts

Even after some big pullbacks for its stock, the company is valued at roughly 53 times expected forward earnings and 9.6 times expected sales. The business should continue to serve up solid sales and earnings growth this year, but there are already signs that macroeconomic conditions are slowing CrowdStrike's expansion momentum. 

With the midpoint guidance for fiscal 2024 calling for approximately $3 billion in sales and $2.30 in adjusted earnings per share, the company expects revenue to climb roughly 34% this year and earnings to increase 49%. These aren't bad growth rates by any stretch of the imagination, but CrowdStrike's valuation is already heavily forward-looking, and it's possible that macroeconomic pressures will further depress the company's share price. 

With the U.S. economy potentially in danger of slipping into recession in 2023 or next year, CrowdStrike could face more challenging operating and valuation backdrops. Additionally, many experts anticipate that the Federal Reserve will take a pause on raising interest rate hikes following the 25-basis-point increase it delivered earlier this month, but that's not a sure thing. If inflation comes in hotter than expected, the Fed may serve up more rate hikes, and that would likely be bad news for CrowdStrike and other growth stocks. 

What comes next for CrowdStrike?

CrowdStrike is delivering best-in-class endpoint device protection technologies, and it stands to see strong demand driven by a rising tide of cybersecurity threats over the long term. While macroeconomic pressures will likely lead to weaker growth in the near term, the business appears to be in great shape and should be able to weather challenging conditions and seize market opportunities. While the stock could see volatile trading in the near term, CrowdStrike looks like a smart buy for growth-focused investors at current prices.