Shares of cybersecurity specialist CrowdStrike Holdings (NASDAQ: CRWD) are on a tear -- up 11.5% from last week's closing price, and up 5.5% today alone (as of 11:15 a.m. EDT).
You can thank investment banker Jefferies & Co. for supporting CrowdStrike and keeping the momentum going.
Cybersecurity "is more important than ever," TheFly.com quotes Jefferies as saying in a note released very early Tuesday, especially now that so many company workforces are spread out over remote locations because of the coronavirus pandemic. And while admitting that the cybersecurity industry is fragmented, with multiple different players doing some things better than others, Jefferies adds that CrowdStrike is at least one of the "companies best-positioned in their cyber market categories," and should be bought as part of a broad cybersecurity "basket" of companies to capture the trend.
Jefferies' note posits a $115 price target for CrowdStrike, up from a previous valuation of $100 a share. Interestingly -- and perhaps not coincidentally -- CrowdStrike stock closed almost precisely at $100 on Friday, before the analyst's note, and still has another $2.50 or so to go before it hits the analyst's new price target.
Will it get all the way to $115? Perhaps. But at a valuation that already exceeds 185 times trailing free cash flow, I have to say -- this stock is looking pretty richly valued already. While I can't disagree with the need for cybersecurity, I suspect there are cheaper ways for investors to buy into this trend.
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