CrowdStrike: Strike The Drumhead While It's Hot

Seeking Alpha2021-11-02

Summary CrowdStike is leading the way in the cybersecurity Industry. The company's growth has blown away analyst expectations. Fundamentals are very solid for a young company. Risks to success are ...

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精彩评论

PS153
2021-11-02
PS153
good company
SandDust
2021-11-02
SandDust
Good reading. Thanks
- Huatheng:
  Ya

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The firm has transformed the cyber security industry in its 10 years of existence by becoming the premier security cloud company name. In the new digital age, cyber security companies focused on new age threats and attacks will be at the forefront of the industry, and I see CrowdStrike maintaining its lead into the future.\nRapid Growth with Room to Run\nCrowdStrike has been a large beneficiary of increased cloud adoption. Their endpoint security system is one of the top systems in the world and has a customer base that includes all the tech conglomerates. Just at a first look at CrowdStrike, it's clear to see the synergies with our rapidly expanding tech landscape.\nSource: CrowdStrike 2021 August Corporate Overview\nBy having a large customer base and <50% YoY subscription growth CrowdStrike's platforms are being increasingly adopted by all types of institutions. The large reach of the cyber security industry across all sectors and the need for CrowdStrike's products for all type of institutions from corporate, governments, non-profits, etc. One of the most encouraging numbers I see is 70% ARR YoY growth. Recurring revenue is revenue that can be counted on and that stable cash coming in while making sure that operational costs come down will increase future cash flow output.\nSource: (CrowdStrike 2021 August Corporate Overview)\nNeed for cyber security as more and more corporations switch to cloud based business operations. Everything from email to server protection, CrowdStrike has a suite of products prepared for all types of institutions. CrowdStrike can capitalize on this low security spend by continuing their massive marketing campaign to advertise their Falcon suite of products. As cloud security spend increases as a percentage of cloud IT spend, legacy providers of cyber security will struggle while corporations embrace endpoint security across all their operations.\nSource: (CrowdStrike Investor Briefing April 2021)\nOne of the growth verticals CrowdStrike can take advantage of is using the AWS market place for finding customers. by using AWS there is a greater reach that the company can have and will increase the elimination of legacy providers and the moat around their service solicitations. Also the increased net ARR from AWS sales is very encouraging because it eliminates the sales costs associated with vending these products to institutions.\nSource: (CrowdStrike 2021 August Corporate Overview)\nRevenue growth has exploded in the past couple of years. This is mainly due to an acceleration of subscription sales. These sales are also very margin efficient as they aren't capital intensive and going forward since many of these transactions will take place through AWS the overall sales spend will be lower. This will allow the company to reinvest back into its assets and improve its suite of products.\nOperations are Efficient and Scalable\nCrowdStrike not only has a rapid growing suite of products but they have the business fundamentals to back them as well. By having stable operations and a growing business the value proposition is palpable. I look forward to seeing the continued execution and maintenance of the excellent business trajectory CrowdStrike is on.\nSource: (CrowdStrike 2021 August Corporate Overview)\nGross Margins are one the most exciting parts about many SaaS products. CrowdStrike has spectacular gross margins which has helped their increasing cashflow. The low cost of every sale through their subscription service means that gross margins should only increase as customers increase the length of their contracts. In the future I would like to see gross margins stabilize out at around 75%. That is a level I believe would be healthy for future growth while also providing a high level of support services.\nSource: (CrowdStrike 2021 August Corporate Overview)\nimproving overall operating leverage is going to be very important to the company's future success. Expenses as a % of revenue have been coming down, which is only natural for a small cap company entering into the large cap stage. This has been seen as CrowdStrike was recently inducted into the Nasdaq-100. I look forward to seeing the future money dedicated toward R&D because while falcon is a great suite of products, I would like to see what other products CrowdStrike could offer while maintaining low operating expenses.\nSource: (CrowdStrike Investor Briefing April 2021)\nCrowdStrike's targets are well within reach. The company has already ended its cash burn and looks to be very well received by analysts heading into future earnings seasons. Currently with revenue projections as they are 3 Billion in ARR should be an accomplishable feat and bolster the valuation of CrowdStrike. Currently the company earnings are $645 Million for FY 21, and with an annualized growth rate of 30% by 2025 the company should be earning $2.39 Billion. This fits within the company's goals as ARR should be around $3 Billion under that scenario. This CAGR would push valuations higher and leave many peers in the dust.\nLow Outside Risks to Business Success\nThere is very low risk for CrowdStrike not to succeed in its goals. They have the technology stack and plentiful resources to ward off an attack from a larger tech conglomerate trying to enter the space. CrowdStrike already has solid partners that give them recurring revenue, and as long as the company continues to outperform in their security promises I see no true risks to overall success.\nSource: (CrowdStrike October 2021 Investor Briefing)\nBeing the number one Vendor in endpoint security for networks is no small task. CrowdStrike has a reputation and impressive sales pipeline which keeps them ahead of other conglomerates looking to disrupt. Being able to get ahead of more established legacy operators like Microsoft (MSFT) and McAfee (MCFE) is no small feat and shows the potential for CrowdStrike moving forward. Looking at EoY 2021 and into 2022, I expect the company to continue to assert their lead and gain market share as a result.\nSource: (CrowdStrike Investor Briefing April 2021)\nThe growth has been occurring at scale and much faster than the rest of their peers. The only other companies listed in this chart that offers cyber security products are Zscaler (ZS), Cloudflare (NET), and Okta (OKTA). CrowdStrike has managed to scale larger and faster than all three of those companies. Also none of those companies offer the same level of endpoint security as CrowdStrike and fit more niche roles that identity verification for websites etc. While this may be a good business model for them it has a smaller TAM than endpoint security. What CrowdStrike has managed to do is take on and work with big tech to bring better end products to consumers. None of the aforementioned companies have done so at the scale CrowdStrike has which make potential competitors to CrowdStrike few and far between.\nValuation is Reasonable given Growth\nCrowdStrike has been on quite the run this year surging over 35% YTD. Even though the company has experienced enormous growth I still believe there is potential for further gain. The underlying business has been executing very steadily throughout the year and I believe with an increase in analyst expectations the stock could easily rally.\nSource: (SA Peer Comparison tool EBITDA)\nEarnings have been very positive for the company in the past couple of quarters. I believe this will continue as expectations increase as well as business execution. Percentage wise they are remaining above their competitors and will see positive earnings momentum going into the future.\nSource: (SA Peer Comparison tool Price/Cash Flow)\nThe company's valuation is much lower on a cash flow basis compared to its peers. CrowdStrike offers the best value for the cash flow of its products and is well positioned to increase this cash flow in the near future. In the next year, I expect this number to come down significantly due to the cash the company will be taking in while the share price accelerates.\nSource: (SA Peer Comparison tool Enterprise Value)\nCrowdStrike is the biggest out of these cyber security operators. That does however come with a big target on its back. While the company may be operating at maximum efficiency it still has the little guys trying to piggyback on their success. As long as the business continues to succeed and the share price remains in a reasonable range the share price looks very attractive at these prices.\nConclusion\nCrowdStrike represents a unique opportunity to get into an industry leader at a reasonable valuation with a stellar business model. I look forward to the next earnings release to see what type of numbers we should expect moving forward. Today, I rate CrowdStrike Very Bullish with a price target of +$350 by the end of 2022.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":841093494,"gmtCreate":1635861857279,"gmtModify":1635861857548,"author":{"id":"3564565270877568","authorId":"3564565270877568","name":"PS153","avatar":"https://static.tigerbbs.com/2e185e8aa9ee6ee618f951b9141b9e40","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"good company","listText":"good company","text":"good company","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/841093494","repostId":1119719424,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"CN"},{"id":843443519,"gmtCreate":1635853985064,"gmtModify":1635853985474,"author":{"id":"3581331938298103","authorId":"3581331938298103","name":"SandDust","avatar":"https://static.tigerbbs.com/ea6083d742fc232449a625fb122842c8","vip":1,"crmLevel":5,"crmLevelSwitch":0},"htmlText":"Good reading. Thanks&nbsp;","listText":"Good reading. Thanks&nbsp;","text":"Good reading. Thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/843443519","repostId":1119719424,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":6425069,"gmtCreate":1635854840741,"gmtModify":1635854840773,"authorId":3566905276489207,"author":{"id":3566905276489207,"authorId":3566905276489207,"name":"Huatheng","avatar":"https://static.tigerbbs.com/59738b973cad55d05e0eda9044f6331e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":843443519,"type":1,"supId":0,"prevId":0,"content":"Ya","text":"Ya","html":"Ya"}],"langContent":"CN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":49,"commentSize":2,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.25.1","shortVersion":"4.25.1","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1119719424"}