
CrowdStrike Holdings
Chart done on hourly timeframe. CrowdStrike shares slipped lower again to kick off the new week as the company continues to deal with the aftermath of the global tech outage. Thousands of consumers and dozens of industries were impacted by the outage, leading some analysts to downgrade the stock, which spread even more fear for investors. In a matter of just two days, the stock fell below its key 100 and 200 day moving averages, supports it has held since May 2023. Some aggressive investors are arguing that this may be a good time to buy the stock, so let’s dive into their numbers.
CrowdStrike is a fast growing company that has managed to boost revenue at double digit percentage points for five years straight. They have grown from an annual revenue of 874M in 2020 to 3.06B last year, a massive jump. Their profits suffered through the years, but they finally posted positive net income for the full 2023 year and Q1 of 2024. Their profit margins and revenue trends are decent, but not strong enough to yet justify the company’s massive valuation. CrowdStrike’s current valuation is 64B, and their price to earnings ratio of upwards of 500x. The only way to justify these numbers is CRWD can boost total annual revenue to 6-7B, and boost profit margins along with it. CRWD is set to post about 4B in revenue this year, which will bring them closer to a fair valuation, and if they maintain the same double digit percentage YoY growth then they can easily top the 6B mark.
The short term risk that the company faces is distrust. Being in the cybersecurity industry, trust from consumers is key to their survival. Luckily for CRWD, the outage wasn’t a result of a cyberattack, however the mistake still reflects possible incompetence and calls investors to question their viability. CrowdStrike’s systems and software is very integrated with many other tech giants, so it’s hard to imagine that they’ll pull the plug, despite the recent occurrences. However it may be difficult for CrowdStrike to win new contracts in the coming months, which may reflect in their guidance. With that being said, if you’re an investors, or looking to invest, you want to ease into the stock and wait for earnings to see what leadership says about the outage. The numbers will paint a clearer picture of how impactful the outage was on them.