Cybersecurity needs and awareness has skyrocketed over the past two years, thanks to the move toward corporate digitalization and the shift towards remote work. Among the biggest beneficiaries of this trend has been cybersecurity specialists like CrowdStrike (CRWD), which have become popular amid the recent surge in cyberattacks.
However, that hasn’t prevented CrowdStrike stock from falling with the rest of the market. Shares have fallen almost 31% over the past six months, trailing the 3.5% decline in the S&P 500 index. But is now a good time to buy? The company is set to report fourth quarter fiscal 2021 earnings results after the closing bell Wednesday. Cybersecurity has played a critical role as more workloads move to the cloud. That’s likely to be the case for the foreseeable future especially as governments and corporations adopt cyber defense architectures that are software-defined and cloud-native.
This was a point CrowdStrike’s CEO George Kurtz made while recently speaking with CNBC about the impact of the Russian invasion in Ukraine: “Governments and corporations have to be ready because cyber will play a critical part in any modern war. Part of the challenge in cyber is there really aren't norms. So what happens with this escalation is really going to be interesting.” In other words, CrowdStrike’s market is likely in increase as a result. But with competition emerging from Palo Alto Networks (PANW), Zscaler (ZS) among others, CrowdStrike is not alone anymore. CrowdStrike has a lot to prove Wednesday and its guidance for the next two quarters will determine how the stock responds.
For the three months that ended January, Wall Street expects the Sunnyvale, Calif.-based company to earn 20 cents per share on revenue of $412.36 million. This compares to the year-ago quarter when earnings were 13 cents per share on revenue of $264.93 million. For the full year, earnings are expected to be 58 cents per share, up from 27 cents per share, while full-year revenue is expected to rise 64% year over year to $1.43 billion.
While valuation concerns have been raised, the company’s ability to execute have never come into question. Aside from a surge in new customer acquisitions, CrowdStrike continues to find ways to get its existing customers to add more features and functionality. What’s more, the massive enterprise shift to work-from-anywhere will continue to drive cybersecurity as one of the hottest sectors in tech in the next few years. This has become even more magnified as corporations scramble to combat not only rising hacker sophistication, but also implement defenses needed to support their digital expansion.
However, CrowdStrike must now dispel concern about what has been described as a massive pull-forward in demand. In the third quarter the company not only crushed revenue and profit estimates, it also guided higher. Q3 adjusted EPS of 17 cents per share beat consensus estimates by 7 cents per share, while Q3 revenue of $380 million rose 63.5%, surpassing the $364.19 million analysts expected. Just as impressive, annual recurring revenue surged 67% year over year to surpass $1.5 billion. The company saw more than 1,600 net new subscription customers added during the quarter.
The 1,600 net new subscription customers underscores the rate at which corporation continue to adopt hybrid work environment, allowing their employees to connect their laptops and other personal devices to the corporate network. This trend bodes well for CrowdStrike’s long-term success, and is an opportunity for the investor to add a quality company to their portfolios.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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