CrowdStrike

CrowdStrike is a fast growing company at the forefront of cloud-based endpoint security. Endpoint security protects each individual device that is connected to a shared network. Desktops, laptops, tablets, and phones are all endpoint devices that can be compromised by a hack or breach. The more devices connected to a network, the more options a hacker has to break into your network and steal valuable personal data and information. When operating a large institution, it is nearly impossible to make sure every device connected to your network is up to the security standards of the organization. This can create weak links in your traditional cyber defense, making your network porous and susceptible to a hack or breach. Furthermore, the devices themselves can become the targets of various cyber attacks. CrowdStrike’s endpoint security platform is able to monitor, detect, and stop all cyber threats by securing all endpoint devices. This allows for consistent protection, non-dependent on what device is connected to the network. This broad integration builds a wall around all your devices, protecting your network, data, and personal information in a simple and uniformed package. Since the product is cloud-based, deployment, configuration, and integration across all endpoint devices is seamless and easy. This allows customers to scale the product extremely fast, protecting a large number of devices with a simple click. I believe CrowdStrike is a fantastic, fast growing company with a strong expanding moat, ready to meet the demands of a volatile digital world. 

CrowdStrike is a security juggernaut, getting smarter and stronger with every breach and hack they stop. According to the companies S-1, “Our cloud-scale algorithms make over 91 million indicator of attack decisions per minute. We are uniquely effective because we have more high fidelity data to train our AI models and more security expertise to guide our feature selection—all resulting in industry-leading efficacy and low false positives.” As the days pass, this company grows stronger with the data they are able to collect. Large data sets have almost become a currency of their own, and CrowdStrike is building a vault of valuable cyber security data. Another important excerpt comes from the company’s 10-K. It says, “We implement this approach by crowdsourcing data across our entire customer base and taking advantage of economies of scale, which we believe enables our AI algorithms to be uniquely effective. Our cloud-based AI is also automatically shared with every customer in our community in real time. We combine multiple methods of detection, prevention, and response to known and unknown threats as well as malware and malware-free techniques across the threat lifecycle.” As this company continues to grow and build a network of clients, its precision, and affectedness against breaches and hacks will compound over time. The moat that CrowdStrike is building around itself through artificial intelligence, machine learning, and server growth is going to fortify this company’s place as the standard for cloud-based endpoint security. 

The market CrowdStrike is addressing is estimated to be $232 billion in size by 2022. CrowdStrike is at the tip of the spear when it comes to growth and innovation within this market. The company believes they are carving out their own category in a new area of the cloud. That category being cloud-based endpoint security. Taken from their 10-K, “The purpose-built, cloud native leaders that began from scratch with multi-tenant architectures, single data models, and SaaS business models have defined entirely new categories such as CRM Cloud, HR Cloud, and Service Management Cloud. We believe we are doing the same for security.” Seeing how everything today has been cloud integrated, it only seems logical your security does the same. The market they are approaching has huge demand given the amount of valuable information kept on networks and personal devices. The last few years have proven that if a modern war is to come, it wont be with a military, but a stealthy digital penetration of countries’ businesses and intelligence agencies. It is worth noting Nancy Pelosi purchased a sizable amount of shares in September earlier this year. Usually, this is not something I care to discuss, but given her rank in government, I take it as a vote of confidence in CrowdStrikes effectiveness and future. 

CrowdStrike has been growing at an extremely rapid rate, with almost 90% of their revenues being subscription based. The companies revenues grew at an astonishing 110% in fiscal year 2019. Below is a chart courtesy of koyfin.com showing revenue growth since the beginning of 2019. With revenues trending up and losses trending down, estimates currently have CrowdStrike profitable by 2024.

 DateCRWD Total Revenues (LTM)CRWD Earnings From Continuing Operations (LTM)
07-31-2020654.28-113.01
04-30-2020563.41-135.02
01-31-2020481.41-141.78
10-31-2019409.76-144.63
07-31-2019351.02-151.45
04-30-2019298.61-132.44
01-31-2019249.82-140.08

Garners Magic Quadrant has $CRWD as a winner in the visionary race only coming second to Microsofts ability to execute. Microsoft’s advantage comes from their sheer size and infrastructure, but overtime I see CrowdStrike overtaking them in this space given the growth of their A.I. 

To no surprise, CrowdStrike’s stock has been on tear since it went public at $34 a share. The Stock currently trades at $153.26 a share, up 350% since its IPO. The stock has recently put in a nice rounded base with its previous ATH providing resistance. I believe the stock is poised to move higher. Chart courtesy of koyfin.com

It’s easy to get paralysis by analysis when digging into such a company. This is especially true with an innovative and fast growing company such as CrowdStrike. Let’s recap the main points. Remember, stocks are binary, and focusing on the relevant information that will move the price up or down is what we are trying to ascertain. 

  1. Extremely strong moat given the A.I’s ability to become better equipped as increased numbers of customers, servers, breaches, and hacks are added to its data set. 
  2. Huge addressable market with high demand as the world continues to store, and share, personal and valuable information on their devices.
  3. Global turmoil and geopolitical chess being played through hacking and data breaching. 
  4. Ease of deployment with ability to scale and integrate quickly through all endpoint devices.  
  5. Triple digit revenue growth with a healthy balance sheet showing $1.06B in cash and $44.8M in debt.
  6. Subscription based model with high retention rate, and an ability to update the product as time passes.

Disclaimer

This blog is based on my own personal opinions and views, and should not be taken as professional investment advice. Market speculation is very risky, and you should do your own research before deploying capital. Any action you take upon the information provided on this website is strictly at your own risk.

I am long $CRWD.

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