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CrowdStrike Holdings (NASDAQ: CRWD) is a cyber security company that went public in June 2019. Its IPO was priced at $34 and CRWD stock is currently trading at $201.5 gaining close to 700% in less than two years. Despite market-thumping gains, shares of CrowdStrike are also trading 31% below record highs, allowing investors an opportunity to buy a quality growth stock at a cheaper valuation.
Let’s see why I’m incredibly bullish on the long-term prospects of CRWD stock.
The bull case for CrowdStrike stock
CrowdStrike offers cloud-based enterprise-facing cyber security solutions. Its Falcon platform provides 19 cloud modules for endpoint and cloud workload protection via a SaaS (software-as-a-service) model. The company aims to target multiple security markets that include corporate workload security, managed security services, IT operations management, threat intelligence services, identity protection, log management as well as security and vulnerability management.
The ongoing pandemic has accelerated the shift towards remote work, driving demand for CrowdStrike’s solutions higher. It remains part of a rapidly expanding addressable market that has allowed CrowdStrike to increase revenue from just $118.7 million in fiscal 2018 to $874.4 million in fiscal 2021 ended in January 2021. This rapid expansion in the top-line has allowed CRWD to narrow operating losses from $131.4 million to $92.5 million in the last three fiscal years.
Its impressive performance continued in fiscal 2022 as in Q3 CRWD reported revenue of $380 million and adjusted earnings per share of $0.17. Comparatively, analysts tracking CRWD stock forecast the company to report revenue of $363.5 million and earnings of $0.10 per share in fiscal Q3.
The company forecast Q4 sales between $406.5 million and $412.3 million with adjusted earnings between $0.19 and $0.21 per share. Wall Street forecast Q4 sales at $399.95 million and adjusted earnings at $0.16 for the company.
We can see that CrowdStrike Holdings managed to outpace analyst forecasts for Q3 and Q4 driving the stock higher by 3% in pre-market trading today.
Key financial metrics for CrowdStrike in Q3
CrowdStrike’s sales rose by 63% year over year in Q3. Comparatively, subscription sales rose by 67% to $357 million, up from $213.5 million in the year-ago period. The company’s annual recurring revenue or ARR increased by 67% to $1.51 billion as it added $170 million net new ARR in the quarter.
Its adjusted net income stood at $41.1 million more than doubling in the last year from $18.6 million. CrowdStrike’s stellar performance in Q3 allowed it to report operating cash flows of $159.1 million, compared to $88.5 million in the year-ago quarter. Its free cash flow also rose from $76 million to $123.5 million in this period.
The company was named a leader in the Modern Endpoint Security segment by market research firm IDC. Its robust suite of products and solutions allowed CrowdStrike to add 1,607 net new subscribers in the quarter ending Q3 with 14,687 customers an increase of 75% year over year.
CRWD co-founder and CEO, George Kurtz explained, “CrowdStrike delivered a robust third quarter with broad-based strength across multiple areas of the business leading to net new ARR growth accelerating and ending ARR growing 67% year-over-year to surpass the $1.5 billion milestone.”
The final verdict
CrowdStrike’s Q3 results demonstrate the flywheel effect of its platform and showcase continued strong customer adoption for its core products as well as the ongoing success of new product initiatives that include identity protection and log management.
CRWD is expected to increase its sales to $1.95 billion by the end of fiscal 2023 while its adjusted earnings per share might expand to $0.78 next fiscal, up from $0.27 in fiscal 2021.
The stock continues to trade at a massive discount to Wall Street estimates, given it might touch $310 per share in the next 12-months.
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