CrowdStrike’s [CRWD] share price was one of the top performers in 2020. Over the course of the year, it soared 317% driven by companies beefing up cybersecurity alongside a wider shift to remote working. CrowdStrike’s share price has been a strong performer in the online security space. In December, the stock gained 43%, outpacing the likes of Okta’s [OKTA] 5.77% gain and Norton’s [NLOCK] 13.93% gain. Given just how far the stock has already climbed, however, is there any upside left? If not, CrowdStrike’s share price could be due a pullback.
How has CrowdStrike’s share price been performing?
CrowdStrike’s share price gains have continued into January, with the stock up 11.59% so far this year (through 8 January’s close). Earnings that have consistently topped Wall Street forecasts can’t be hurting investor confidence.
In Q3, CrowdStrike delivered earnings of $0.08 a share in the third quarter against analyst expectations of a slight loss. That quarter saw total revenue of $232.5m, up 86% on the $125.1m seen in the same quarter last year. Annual recurring revenue (ARR) came in at $907.4m, an 81% year-on-year increase. GAAP subscription gross margin was 77% compared to 74%. CrowdStrike is expecting revenues of between $245.5m and $250.5m for Q4, and between $855m to $860m for the full year, having previously raised earnings expectations.
“CrowdStrike’s robust growth at scale underscores our growing leadership in the Security Cloud category and the immense value we deliver to customers seeking to transform, consolidate and fortify their security posture,” said George Kurtz, CrowdStrike’s co-founder and CEO.
"CrowdStrike’s robust growth at scale underscores our growing leadership in the Security Cloud category and the immense value we deliver to customers" - George Kutz, CrowdStrike co-founder and CEO
Cybersecurity theme gets nod from Cramer
Cybersecurity made its way onto Mad Money host Jim Cramer’s list of investable themes in 2021. According to Cramer “it’s these long-term themes that work the best. You can buy them tomorrow and then you can buy some more if they get knocked around the next day, and the next.”
Cybersecurity stocks performed better than the tech-heavy Nasdaq in 2020 — a trend that could continue into the New Year. That shouldn’t come as too much of a surprise, with Microsoft [MSFT] disclosing a massive cybersecurity breach of its source code, the SolarWinds [SWI] attack targeting cybersecurity stock FireEye [FEYE], and repeated attacks on vaccine makers, including Novavax [NVAX] and AstraZeneca [AZN.L].
Security breaches are only likely to intensify, along with the money companies spend safeguarding their online business. According to research by Forester, cybersecurity spend will hit $12.6bn in 2023, almost double what it was in 2018. This runs in parallel with the overall shift to cloud technology. The Forester researchers predict that the overall cloud spend for 2020 will be circa $236bn — a sharp increase from the $178bn spent in 2018.
Predicted overall cloud spend 2020
“In general, companies like to invest in public, private and hybrid cloud solutions for multiple needs. However, the challenge to them arises when they have to monitor data and detect threats,” said Jennifer Adams, senior forecast analyst at Forrester.
Where next for CrowdStrike’s share price?
As more data is moved to the cloud, the need for cybersecurity solutions like CrowdStrike will increase. Should this trend continue, CrowdStrike’s share price and bottom line could benefit. CrowdStrike is in an enviable position of having 49 of the Fortune 100 companies as clients, including 40 of the top companies globally.
However, investors might want to consider waiting for CrowdStrike’s share price to dip before buying. Among the analysts tracking the stock on Yahoo Finance, CrowdStrike carries an average $195.53 price target — a 15.8% downside on the current price (through 11 January’s close). Among the bears are JP Morgan analyst Sterling Auty who downgraded the stock to neutral from outperform, maintaining a $175 price target. The most bullish target on Wall Street is $245, which would see a 5.5% upside on its current price.
|Operating margin (TTM)||-13.88%|
|Quarterly revenue growth (YoY)||85.80%|
CrowdStrike's share price vitals, Yahoo Finance, 12 January 2021