Stock Analysis & Ideas

CrowdStrike (NASDAQ:CRWD) Stock Is Well-Positioned to Grow Amid Macro Headwinds

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Despite the increase in the list of macro headwinds, CrowdStrike’s business is showing no signs of a slowdown. CRWD’s key performance metrics are growing and remain strong.

CrowdStrike (NASDAQ:CRWD) continues to grow rapidly despite the increasing macroeconomic challenges. This is well reflected by the stellar growth of its ARR (annual recurring revenues – a key measure of future revenue growth), record pipeline, high retention rate, and growing customer base. 

No Signs of a Slowdown in CRWD’s Business

After record growth in Q1, CRWD’s ending ARR crossed the $2 billion milestone (reached $2.14 billion), up 59% year-over-year in Q2. Moreover, net ARR touched $218 million. Furthermore, it added 1,741 new subscription customers, while the dollar-based net retention rate reached its highest level in the past seven quarters. 

CrowdStrike’s CEO George Kurtz stated, “We continue to see strong demand even as organizations responded to macroeconomic conditions.” Further, CRWD is winning customers and sees a favorable competitive environment. 

Kurtz added that cybersecurity remains a priority for corporations, and CRWD is entering Q3 with a robust pipeline. 

Thanks to the strength of its business, CRWD raised its full-year outlook. It expects to deliver total revenue in the range of $2,223 million – $2,232 million in FY23, up from its previous guidance of $2,190.5 million – $2,205.8 million. Moreover, it expects to report adjusted EPS of $1.31 – $1.33 compared to its earlier guidance of $1.18 – $1.22. 

Is CrowdStrike Stock a Buy, Sell, or Hold?

Wall Street is bullish about CrowdStrike stock. It has received 20 unanimous Buy recommendations for a Strong Buy rating consensus on TipRanks. 

Stephens analyst Brian Colley reiterated a Buy recommendation on CRWD stock and stated, “CRWD raised FY23 guidance above consensus across all key metrics, with implied 2H sales guidance increasing by 1%/$9M. F3Q23 guidance is above the Street for sales/EPS and slightly below for EBIT.”

Colley termed CrowdStrike as the “best idea” and has a price target of $236 (22.1% upside potential). 

Overall, analysts’ average price target of $233.30 implies 20.7% upside potential over the next 12 months.

Bottom Line: CRWD’s Performance Metrics Stay Strong 

CrowdStrike’s key performance metrics, including ARR, dollar-based retention rate, and customer growth, are unaffected by the economic slowdown. Further, an increasing number of its customers are adopting multiple modules, which generates incremental revenues at a minimum client acquisition cost. The number of customers adopting five or more, six or more, and seven or more modules, increased by 59%, 36%, and 20%, respectively, at the end of Q2. 

Overall, CrowdStrike is delivering robust growth at scale with solid unit economics. Further, it is growing its operating income and free cash flow at a brisk pace despite a challenging macro backdrop.

Disclosure 

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