By just about any measure, CrowdStrike (CRWD +2.81%) stock is on a tear this year. The cybersecurity company has likely benefited from the focus on artificial intelligence (AI) as investors scrambled to capitalize on this increasingly important technology.
AI is not the only reason to consider CrowdStrike. Still, with the cybersecurity stock up significantly this year, investors may question whether they missed the opportunity to buy.
NASDAQ: CRWD
Key Data Points
Understanding CrowdStrike
Although CrowdStrike can address many cybersecurity threats, users know its Falcon Security Suite best for its endpoint security. An endpoint is any device that interacts with the network, such as a PC, smartphone, or server.
Despite the recent focus on AI, artificial intelligence probably is not the differentiator as some might assume. Like its peers, CrowdStrike has used the technology for years.
It uses a form of AI called machine learning. As the name implies, as computers learn more about potential threat, they automatically update the security suite to address them.
Moreover, machine learning includes generative AI, the type of AI that generates new data from existing information. The company has introduced Charlotte AI, which helps users understand the security threats confronting their organizations. It offers threat intelligence using simple prompts and automates repetitive tasks involving the collection and extraction of data.
Still, this product comes to market at a time when companies have curtailed investments in the cloud. The largest cloud provider, Amazon's AWS, has recently had growth rates barely in the double digits, well below the 29% increase in 2023.
CrowdStrike by the numbers
But despite concerns, interest in CrowdStrike's platform continues to grow. For now, 63% of its customers subscribe to at least five CrowdStrike security modules. Consequently, growth is still considerable, though it has slowed noticeably. In fiscal 2023 ended Jan. 31, revenue rose 54%.
So far, the fiscal 2024 performance has not matched that level. The company had $1.4 billion in revenue in the first half of fiscal 2024 (ended July 31). That was 39% higher than in the same period of fiscal 2023 but a slowdown from the last fiscal year.
That higher revenue led to a $35 million operating loss. But with $67 million in interest income, it covered its remaining expenses and posted $9 million in net income for the six-month period.
Investors should not expect a significant slowdown in growth. For the fiscal year, CrowdStrike forecasts just over $3 billion in revenue, which would be an increase of 36%.
However, the considerable increase in the stock price during the year naturally leads to questions about valuation. Indeed, the price-to-sales (P/S) ratio has risen to more than 16, up from a low of 11 early in the year.
Also, investors may wince at the 63 forward price-to-earnings (P/E) ratio, especially since it was under 40 at one point in February. Considering such a valuation, one has to believe strongly in the growth story to justify that premium price.
Should I invest?
Ultimately, buying CrowdStrike at these levels should pay off for investors. Admittedly, some companies have slowed cloud spending, meaning growth rates could decelerate for a time.
Nonetheless, cybersecurity is a necessity for any cloud network. Thus, growth should remain rapid. As long as CrowdStrike builds on its profits, both the company and the stock price should continue to build from these levels.
