Missed the Boat on Nvidia? Consider Crowdstrike Stock

Crowdstrike Stock

While Nvidia (NASDAQ:NVDA) has garnered significant attention with its remarkable 210% gain in 2023, there are other artificial intelligence (AI) stocks poised to benefit from the AI surge.

One such contender is cybersecurity firm Crowdstrike Holdings (NASDAQ:CRWD). Crowdstrike stock rose by 73% year to date, and analysts believe it holds substantial growth potential. Let’s delve into the reasons behind this optimism.

A Leader in Combating Cyber Threats

Crowdstrike specializes in cutting-edge technologies to combat evolving cyber threats. It provides businesses worldwide with endpoint protection, threat intelligence, and cyberattack response services.

At the core of Crowdstrike’s offerings is its AI-powered Falcon platform, widely embraced by customers. This platform employs a blend of AI, machine learning, and behavioral analytics to continuously monitor and assess endpoint activity in real-time. Its effectiveness lies in detecting fraudulent actions and preventing potential threats from causing harm. The company’s incident response services have also gained acclaim for their ability to assist organizations in responding swiftly to cyber threats and breaches.

In the second quarter (ending Aug. 30), Crowdstrike reported a 37% year-over-year increase in total revenue, reaching $732 million. Annual recurring revenue (ARR) mirrored this growth, surging by 37% to $2.9 billion, demonstrating the company’s ability to retain its customer base.

Additionally, Crowdstrike has been encouraging existing customers to leverage more of its cloud-based modules. In the recent quarter, 63% of its subscription customers utilized five or more modules, up from 59% in the same period the previous year. Furthermore, the customer base with at least seven modules increased from 20% to 24%.

A Bright Outlook for This Cybersecurity Stock

Looking ahead, CEO George Kurtz anticipates “double-digit net new ARR growth” in the second half of the year, attributing it to the increased need for “better, faster, and more cost-effective protection in a digital society,” a need that Crowdstrike is well-equipped to address.

Management’s Q3 revenue forecast ranges from $775 million to $778 million, indicating a 33% growth compared to the same quarter last year. Notably, Crowdstrike has witnessed remarkable revenue growth, soaring from $481 million in fiscal 2020 to $2.24 billion in fiscal 2023.

Furthermore, the company expects adjusted earnings per share (EPS) to potentially increase by 85% year over year in Q3 and by 82%-84% for the full year, surpassing market expectations. Crowdstrike has outperformed Wall Street’s earnings estimates in three out of the last four quarters.

With the cybersecurity market potentially reaching $266 billion by 2027 at a 9% compound annual growth rate, Crowdstrike, equipped with generative AI, is well-suited to address security breaches. Its commitment to product innovation positions it favorably for capitalizing on this growth.

As of the end of Q2, Crowdstrike reported a remarkable 39% year-over-year increase in positive free cash flow, totaling $189 million, along with a substantial cash reserve of $3.17 billion. As global cyber threats continue to escalate, Crowdstrike’s potential to expand its reach through international collaborations to enhance cybersecurity efforts becomes evident.

In 2023, the global average cost of data breaches has reached $4.35 million. Proactive cybersecurity measures offer cost savings for companies, making cybersecurity an area where businesses are less likely to cut expenses, even during uncertain economic times. This resilience positions Crowdstrike as a steadfast stock through economic cycles.

Analyst Expectations for Crowdstrike Stock

Analysts project Crowdstrike’s revenue to grow by an impressive 36%, from $2.24 billion in fiscal 2023 to $3.04 billion in fiscal 2024, aligning with management’s forecast. They anticipate further revenue growth to $3.91 billion by fiscal 2025, a feasible target given the rapid expansion of the AI industry and the demand for cybersecurity solutions.

Profits are expected to continue rising, with analysts foreseeing adjusted EPS of $0.39 in fiscal 2024, compared to a loss of $0.79 per share in fiscal 2023. This trend is expected to persist, with an anticipated EPS of $0.63 in fiscal 2025.

Many analysts have raised their target prices for CRWD in September, reflecting the company’s impressive growth potential. Currently, among the 39 analysts covering Crowdstrike stock, 33 recommend a “strong buy,” 2 suggest a “moderate buy,” and 4 label it as a “hold,” with no “sell” recommendations.

Based on the average price target of analysts at $191.95, Wall Street envisions approximately 5.5% potential upside for CRWD over the next 12 months, with the highest target price at $240 and the lowest at $153.

Key Takeaway

Crowdstrike has established itself as a cybersecurity trailblazer. With solid fundamentals, a strong balance sheet, and promising long-term prospects in the AI-driven cybersecurity market, CRWD is well-positioned to continue leading the charge in safeguarding the digital landscape, making it an attractive growth stock to consider.

Featured Image – Megapixl © Andreistanescu 

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.