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Are Earnings Reflecting Market Demand? | #hacking | #cybersecurity | #infosec | #comptia | #pentest | #ransomware


CrowdStrike Holdings, Inc. (CRWD), a leading provider of innovative cybersecurity solutions, beat first-quarter top and bottom-line analyst expectations. The company posted a total revenue of $921.04 million, surpassing the consensus estimate of $904.82 million. Also, its non-GAAP EPS was $0.93 for the first quarter, compared to analysts’ expectations of $0.89.

Moreover, annual recurring revenue (ARR) rose 33% year-over-year to $3.65 billion as of April 30, 2024, of which $211.7 million was net new ARR added during the quarter.

During the quarter, CrowdStrike delivered the next generation of SIEM to power the AI-native SOC with Falcon Next-Gen SIEM. It supports the largest ecosystem of ISV data sources of any pure-play cybersecurity vendor. It also made its Falcon Application Security Posture Management available and launched new Cloud Detection and Response innovations.

Also, the company expanded its strategic partnerships and alliances with global system integrators (GSIs), managed service providers (MSPs), and managed security service providers (MSSPs). CRWD expanded its partnership with Amazon Web Services (AWS) to accelerate cybersecurity consolidation and cloud transformation.

George Kurtz, CrowdStrike’s president, chief executive officer, and co-founder, stated, “The Falcon platform’s differentiated architecture creates a wide competitive moat and uniquely enables CrowdStrike to solve the industry’s biggest cybersecurity, IT and data problems. Customers of all sizes are standardizing on the Falcon platform to achieve better security outcomes and lower their TCO.”

According to the outlook for the second quarter, CRWD expects total revenue between $958.30 million and $961.20 million. Its non-GAAP income from operations is expected to be $208.30 million – $210.50 million. Non-GAAP net income attributable to CrowdStrike is expected to range from $245.70 million to $247.80 million and from $0.98 to $0.99 per share.

For the full year 2025, the company expects total revenue of $3.98 billion – $4.01 billion. It expects non-GAAP income from operations of $890.10 million – $916.50 million. Also, non-GAAP net income attributable to CrowdStrike is expected to range between $985.60 million and $1.01 billion. Its non-GAAP net income per share is anticipated to be $3.93 – $4.03.

Shares of CRWD have gained 42.2% over the past six months and 122.5% over the past year to close its last trading session at $340.49.

Let’s look at factors that could influence CRWD’s performance in the upcoming months.

Recent Developments

On May 30, CRWD and eSentire, a leading Managed Detection and Response provider, expanded their partnership to integrate threat intelligence and power eSentire’s 24/7 managed security operations with the breadth of the AI-native CrowdStrike Falcon® cybersecurity platform.

Under the expanded partnership, eSentire is doubling down on CrowdStrike to fulfill customer consolidation requirements and take over the protection of global Carbon Black accounts. The partnership aligns well with CRWD and will deepen its commitment to exploring the power of AI-native cybersecurity with eSentire’s award-winning MDR.

Also, CRWD expanded its distribution partnership with Ignition Technology to bring the AI-native CrowdStrike Falcon® cybersecurity platform to Ignition’s Nordic partner base. With this, Ignition’s partner network in Denmark, Sweden, Norway, Finland, and Iceland will gain access to the Falcon platform to drive vendor consolidation and stop breaches with advanced AI-native cybersecurity.

The strategic partnership bodes well with CRWD’s operations and will help to scale and accelerate its partner-first go-to-market.

Robust Financials

For the first quarter that ended April 30, 2024, CRWD’s total revenue increased 33% year-over-year to $921.04 million. Its non-GAAP subscription gross profit grew 34.5% year-over-year to $701.48 million, while non-GAAP professional services gross profit grew just 4.7% from the year-ago value to $19.79 million.

Furthermore, the company’s non-GAAP income from operations of $198.74 million indicates growth of 71.5% year-over-year. Non-GAAP net income attributable to CrowdStrike came in at $231.67 million and $0.93 per share, up 69.9% and 63.2% from the prior year’s quarter, respectively. Its free cash flow rose 41.8% from the year-ago value to $322.46 million.

As of April 30, 2024, CRWD’s total assets stood at $6.84 billion, compared to $6.65 billion as of January 31, 2024.

Solid Historical Growth

CRWD’s revenue grew at a CAGR of 48.7% over the past three years, while its tangible book value improved at a CAGR of 67.2%. Its total assets increased at a CAGR of 33.4% over the same period, while the company’s levered free cash flow grew at a CAGR of 33.9% over the same time frame.

Favorable Analyst Estimates

Analysts expect CRWD’s revenue for the second quarter (ending July 2024) to come in at $961.21 million, indicating an increase of 31.4% year-over-year. The consensus EPS estimate of $0.99 for the same period reflects a 33.2% year-over-year improvement. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

For the fiscal year (ending January 2025), the company’s revenue and EPS are anticipated to grow 31% and 29.9% year-over-year to $4.0 billion and $4.01, respectively. In addition, Street expects its revenue and EPS for the fiscal year 2026 to grow 26.3% and 22.7% from the prior year to $5.05 billion and $4.92, respectively.

Mixed Profitability

CRWD’s trailing-12-month gross profit margin of 75.29% is 51.2% higher than the 49.79% industry average. However, its trailing-12-month EBIT margin of 0.74% is 84.1% lower than the industry average of 4.66%. And the stock’s trailing-12-month ROTC of 0.53% is 80.4% lower than the industry average of 2.68%.

Furthermore, the stock’s ROCE and ROTA of 6.36% and 1.92% are 60.6% and 24.2% higher than the 3.96% and 1.55% industry average, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, CRWD is currently trading at 84.81x, 253.6% higher than the industry average of 23.98x. Also, the stock’s forward EV/Sales and Price/Sales of 19.99x and 20.70x are considerably higher than the industry average of 2.93x and 2.92x, respectively.

Additionally, the stock’s forward EV/EBITDA and Price/Cash Flow of 76.04x and 53.85x are 412.7% and 129.9% higher than the industry averages of 14.83x and 23.42x, respectively.

POWR Ratings Reflect Uncertainty

CRWD’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CRWD has an A grade for Growth and Sentiment, consistent with its robust financial performance and optimistic analyst estimates.

However, the stock has a C grade for Momentum. CRWD is currently trading below its 50-day and 200-day moving averages of $317.48 and $258.09, respectively, indicating a downtrend. Also, it has an F grade for Value, justified by higher-than-industry valuation.

CRWD is ranked #12 among the 22 stocks in the B-rated Software – Security industry.

Beyond what I have stated above, we have also given CRWD grades for Stability and Quality. Get access to all the CRWD ratings here.

Bottom Line

CRWD reported better-than-expected earnings in the first quarter of fiscal 2025. Further, the company’s long-term prospects appear promising, driven by its cutting-edge product offerings, strategic partnerships and investments, and technological innovations.

Despite solid revenue growth, CrowdStrike grapples with high operating expenses, which constitute around 75% of its total revenue. As the company continues to expand globally, it encounters hurdles related to compliance with diverse international regulations and intense competition in new markets.

Given CRWD’s elevated valuation and uncertain near-term growth prospects, waiting for a better entry point in this stock seems prudent.

Stocks to Consider Instead of CrowdStrike Holdings, Inc. (CRWD)

Given its near-term uncertain prospects, the odds of CRWD outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these A (Strong Buy) or B (Buy) stocks from the Software – Security industry instead:

Radware Ltd. (RDWR)

Trend Micro Incorporated (TMICY)

Clear Secure, Inc. (YOU)

For exploring more A and B-rated software stocks, click here.

What To Do Next?

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CRWD shares fell $2.06 (-0.61%) in premarket trading Friday. Year-to-date, CRWD has gained 31.80%, versus a 12.32% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More…

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