CrowdStrike (CRWD +1.37%) emerged as a leading cybersecurity company. Its leadership in endpoint security and an array of security products made it a popular choice for organizations and investors alike.
However, a high valuation may leave investors questioning whether it's too late to buy the stock. Given its current conditions, should investors continue to add shares or stay away?
The state of CrowdStrike
CrowdStrike appears to be firing on all cylinders as a company. It's known for its strengths in endpoint security, which means its Falcon platform secures the entry points of devices such as smartphones, laptops, and servers. It also employs crowdsourcing to find data breaches, hence the company's name.
Its product lines also extend into other areas such as zero-trust and ransomware protection. That helped CrowdStrike stand out in an industry where customers increasingly want to buy all of their cybersecurity products from one company.
Unlike Palo Alto Networks, CrowdStrike hasn't felt the need to offer months of free products to retain its clients, stating on its fiscal Q4 2024 earnings call that "free is not free."
So successful is its approach that 64% of all customers subscribe to at least five modules. Moreover, the number of customers with eight or more modules doubled in the fourth quarter from the previous year.
Gross retention, meanwhile, is at 98%, meaning few organizations have switched away from CrowdStrike. Also, with the dollar-based net retention of 119%, the average long-term customer spent 19% more on CrowdStrike products on average than in the previous year.
Thanks to its product lines and strategy, the cybersecurity stock is up more than 145% over the past year, outperforming other industry peers.
Indeed, with Fortune Business Insights forecasting a compound annual growth rate of 14% for the industry through 2030, the improvements for CrowdStrike and its competitors should continue for years. Still, customers have numerous choices in this space, including Zscaler, Palo Alto Networks, and Fortinet. Hence, the company will have to continue working hard to stand out.
CrowdStrike by the numbers
Fortunately, its approach led to just under $3.1 billion in revenue in fiscal 2024 (ended Jan. 31), a 36% yearly increase.
With that growth, CrowdStrike earned its first yearly GAAP profit, reporting a net income attributable to CrowdStrike of $89 million. That was up from the $183 million loss in the previous fiscal year.
The company also forecasts between $3.924 billion and $3.989 billion in revenue in fiscal 2025. That constitutes a 29% yearly increase, a rapid but somewhat slower growth rate.
That may leave prospective investors wondering whether now is the time to buy, since its recent outperformance has led to outsize valuations. Currently, it trades at a price-to-sales (P/S) ratio of around 25 and a forward P/E ratio of just over 77. Such metrics price it for perfection, and while the stock is performing well, even CrowdStrike bulls may hesitate to buy at these multiples.
NASDAQ: CRWD
Key Data Points
Is it too late for investors to buy CrowdStrike stock?
Deciding whether investors are "too late" depends on one's timeline. In a short-term sense, investors are probably too late to make aggressive moves into the stock. Because of the elevated valuation and the likelihood of slower revenue growth, even a slight disappointment could prompt investors to sell, which could lead to losses in the short term and possibly the medium term as well.
However, with the anticipated industry growth and CrowdStrike's leadership, the stock is likely to move higher in the long run. Assuming investors choose to buy now, they should consider adding shares slowly. Such a move can offer the benefits of CrowdStrike's growth potential while limiting the impact of possible short-term losses.
