In the midst of a tumultuous economic landscape, the Nasdaq Composite saw its descent into bear market territory over a year ago, its status still down by a quarter. Yet, as history reveals, this decline will be ephemeral. As the economic winds inevitably shift, the Nasdaq will bounce back, ushering in a new phase of bullish ascent. In anticipation, investors should consider acquiring shares in CrowdStrike Holdings (NASDAQ: CRWD), a thriving artificial intelligence (AI) growth stock with promising potential.
Rapid expansion seems to be the name of the game for CrowdStrike, as businesses continue to navigate the uncertain economic times by vigilantly managing their budgets and spending with caution. Though even cybersecurity firms face adversity in these circumstances, CrowdStrike posted remarkable financial results in the previous year.
In the 2023 fiscal year, the company saw a 41% rise in its client base, reaching 23,000, while the average spending per client escalated by 25% compared to the prior year. This, in turn, led to a 54% increase in revenue, hitting $2.2 billion, and a staggering 130% surge in adjusted net income, settling at $1.54 per diluted share.
However, investors should take note of an even more awe-inspiring metric: CrowdStrike surpassed $2 billion in annual recurring revenue (ARR) during the second quarter of the 2023 fiscal year (concluding on July 31, 2022). Zooming to this milestone in around 11 years, only one software company—Zoom Video Communications—managed to get there quicker. As the second-fastest-growing software vendor in history, CrowdStrike is poised to maintain this trajectory for years to come, particularly in the face of an increasingly favorable economic climate.
CrowdStrike’s stronghold in the competitive landscape is robust. Among its many accolades procured last year, the company was recognized as the top security firm in the U.S. by SC Media consulting, while its extended detection and response software claimed the title of best-emerging technology in Europe.
Other acknowledgements of note from industry pros include the distinction of market leader across cybersecurity software verticals such as cloud-native application protection and threat intelligence, as well as cybersecurity service verticals like managed detection and response, and incident response. Yet, the company’s most distinguishing success resides in its leadership in endpoint security, an essential market segment.
Approximately 80% of the most coveted security data is generated by endpoint devices like desktops and servers, making this data the bedrock of AI. This critical advantage empowers CrowdStrike’s platform to harness data in a way that no other solution on the market can match, fashioning its AI models into uniquely efficacious tools.
To borrow a phrase from consultancy firm Frost & Sullivan, ‘CrowdStrike leads the industry with regards to the application of artificial intelligence/machine learning to endpoint security, as well as providing unparalleled prevention of malware and malware-free attacks.’
Not only innovative, CrowdStrike keeps a firm eye on significant market opportunities. Over the years, it has proven its ability to keep up with an ever-changing tech landscape. With a portfolio of 10 software modules during its 2019 public debut, the company now boasts 23 software modules.
Each innovative product extends the company’s total addressable market (TAM), now assessed at $76 billion. And with management’s forward-looking focus, they predict future advancements will propel the TAM to a staggering $158 billion by 2026.
Three key reasons position CrowdStrike for success in seizing this vast market potential. First, its dominant presence in endpoint security yields a data advantage, ensuring its AI remains at the forefront of threat intelligence, ultimately outperforming its peers in detecting and preventing cyber threats.
Second, its wide-ranging suite of cybersecurity software and services lets businesses consolidate under one platform, reducing the costs and complexities that come with managing different products from various vendors. In essence, CrowdStrike streamlines security operations for clients.
Finally, as the dominant force in managed detection and response services, CrowdStrike stands as the leading choice for organizations struggling to maintain their cybersecurity capabilities due to time or talent limitations. This positions the company favorably, given the current shortfall of 3.5 million unfilled cybersecurity positions globally, as reported by Cybersecurity Ventures.
Factoring in these dynamics, CrowdStrike shares presently trade at 13.5 times sales, a noticeable markdown from the three-year average of 35.1. For investors with an appetite for risk, this moment presents an opportune time to secure a modest stake in this formidable growth stock.
As the world ventures further into the future, intertwining with the unstoppable tendrils of technology, the necessity for robust cybersecurity measures only intensifies. In this realm, the promise of CrowdStrike as a juggernaut of AI-driven protection stands poised to thrive, offering a distinctive investment opportunity for those with an eye on the horizon, where a new bull market awaits.