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Crowdstrike Holdings (CRWD) has quickly emerged as a top player in the cybersecurity space, thanks to the artificial intelligence (AI) that powers its products. As the world becomes more digital, the threats to businesses, governments, and individuals also rise, necessitating tighter security. Crowdstrike addresses these needs by offering cloud-native endpoint security solutions. The company's crown jewel, the AI-powered Falcon platform, detects and prevents cyberattacks in real-time.
Since its initial public offering in 2019, the company has grown significantly. Crowdstrike's financial performance has drastically improved in recent years, with total revenue increasing from $481 million in fiscal 2020 to $3.06 billion in fiscal 2024.
CRWD stock soared 142% in 2023, easily outperforming the S&P 500 Index's ($SPX) 25% gain. Year-to-date, CRWD stock has increased 28.5%, owing in part to its recent Q4 fiscal 2024 results. Wall Street believes the company has enormous growth potential, despite its elevated valuation. Analysts rate the stock as a "strong buy," with a potential upside of around 32% in the next 12 months. Let's dig deeper to find out more.
Crowdstrike Reports a Blowout Quarter
Total revenue in the fourth quarter of fiscal 2024 (ended Jan. 31) increased 33% year on year to $845.3 million. Revenue surpassed analysts' estimates by $5.4 million.
The company's subscription-based model has generated recurring revenue streams, demonstrating Crowdstrike's ability to retain customers. In the fourth quarter, annual recurring revenue (ARR) increased 34% to $3.4 billion, contributing to the company's consistent top-line growth. The company ended the year with 29,000 subscription customers. Its gross retention rate also stood at an impressive 98%.
Adjusted diluted net income of $0.95 per share was significantly higher than the consensus estimate of $0.13. Earnings increased by 102% over the prior-year quarter, and Crowdstrike managed its fourth straight quarter of both GAAP (generally accepted accounting methods) and adjusted net profits.
In Q4, the company’s free cash flow increased by 35% to $283 million. Additionally, cash, cash equivalents, and short-term investments stood at $3.47 billion.
On a full-year basis, fiscal 2024 revenue and earnings increased by 36% and 100.7% over fiscal 2023, respectively.
Exceptional Growth Ahead
The global cybersecurity market could be worth $298.5 billion by 2028, according to industry estimates. Crowdstrike, as an expert in recognizing and resolving security threats through its high-end, AI-powered products, is well-positioned to capitalize on this growth.
Furthermore, the company recently announced its intention to acquire Flow Security. By integrating Flow's data security posture management with Falcon, the company aims to offer a cloud data protection platform.
Talking about long-term goals, CrowdStrike's CFO Burt Podbere stated that the company remains “relentlessly focused on profitably scaling the business to $10 billion ARR and beyond."
Analysts predict Crowdstrike's revenue will increase by 30% to $3.97 billion in fiscal 2025, up from $3.6 billion in fiscal 2024. Management's forecast ranges from $3.92 billion to $3.98 billion.
Revenue could further increase to $5.01 billion by fiscal 2026. The revenue target seems achievable, given the growing demand for cybersecurity.
Crowdstrike's profits are expected to continue rising at the same rate. Management expects adjusted earnings per share (EPS) to range between $3.77 and $3.97 in fiscal 2025. Compared to a loss of $3.09 per share in fiscal 2024, analysts predict adjusted EPS growth of 26.5% to $3.91 in fiscal 2025, followed by a 25.4% increase to $4.90 in fiscal 2026.
What Is Wall Street Saying About CRWD Stock?
Following the Q4 results, Susquehanna analyst Shyam Patil reiterated his "buy" rating for the stock, raising the target price to $410 from $330. According to Patil, Crowdstrike's fourth-quarter performance demonstrated strong business momentum. Patil believes the “company’s consistent performance and strategic initiatives position it well for future success."
Likewise, encouraged by the company's rapidly growing top and bottom lines, analysts at Morgan Stanley and Citi also raised their target prices for CRWD stock.
Currently, out of the 40 analysts that cover Crowdstrike stock, 35 have a “strong buy” rating, three suggest a “moderate buy,” and two recommend a “hold.” Based on analysts' average price target of $389.87, Wall Street sees a potential upside of about 18.9% from current levels. The highest target price for CRWD stands at $435, implying a growth of 32.4% in the next 12 months.
What's the Bottom Line on CRWD Stock?
The cybersecurity market is poised for greater expansion as organizations across industries implement robust cybersecurity measures. According to Statista, the global average cost per data breach in 2023 increased to $4.45 million from $4.35 million the previous year. Generally, companies will never hesitate to spend money on cybersecurity measures.
This means more opportunities for Crowdstrike in the long run, as AI has helped it establish a stronghold in the cybersecurity market. Its solid top- and bottom-line growth, hefty balance sheet, and impressive AI-led prospects in the cybersecurity market make it a reliable growth stock to buy right now.
However, CRWD stock trades at 67 times forward 2026 earnings and 15 times forward sales, which is undeniably high - making some investors wary of buying at current levels. I believe that with its exceptional growth projections and scope in the cybersecurity market, investors can still profit handsomely from this stock in the long term. However, given the high valuation, starting with a small stake would be a wise move now.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
