Shares of cloud-based cybersecurity software developer CrowdStrike Holdings (NASDAQ: CRWD) have been quite an outlier amid the recent wave of weakness hitting high-multiple tech.
While CRWD stock did get pummeled, the stock wasn’t hit nearly as hard as some of the other hyper-growth stocks with price-to-sales multiples north of 40 times.
Indeed, CrowdStrike stock is still costly at 34.8 times sales, even with the name down around 27% from its all-time high of around $285 per share. While the magnitude of the decline seems excessive, the stock itself is still up considerably from its pre-pandemic high.
As rates rise, high-multiple names will continue to be punished, but don’t count on a cybersecurity kingpin like CrowdStrike to surrender the remarkable gains posted in the last two years. As CRWD shares sag, I’ll be keeping a close watch on the name. I am bullish on CrowdStrike.
Worthy Growth Stock, Even as Growth Trade Sinks
Unlike many of the high-multiple lockdown beneficiaries, though, CrowdStrike can build on its strength on the other side of the pandemic. The company is a leader in endpoint security solutions, a market with long-term growth prospects that many investors may still underestimate.
The rate and severity of cyber threats are going up at an alarming rate over time. With that, so goes the need for CrowdStrike’s invaluable offerings, both in protection and remediation.
As cyber threats evolve over time, CrowdStrike will need to stay on its toes, and R&D expenditures could remain elevated. Fortunately, given the company’s strong networking effects, it has significant upselling opportunities, as it looks to pitch its products that evolve in accordance with the emergence of new types of cyber threats.
CrowdStrike Is a Magnificent Company
While the cybersecurity trend is worth getting behind, not all firms within the space are built to last. CrowdStrike stands out, with an incredible management team and ability to stay on the cutting edge of cybersecurity innovation.
Cyber threats are constantly getting smarter. CrowdStrike has already proven that it can stay a step or so ahead of the bad guys with its next-level threat intelligence.
With a comprehensive suite of continuously evolving solutions, CrowdStrike is a firm that can really offer its clients peace of mind. Indeed, such cyber products are quickly becoming an absolute necessity.
The cybersecurity industry also stands to become less cyclical in nature, making CrowdStrike one of the more defensive growth plays in the entire tech space.
Top-of-the-line defences are always needed for firms, regardless of the state of the economy. Many firms are beginning to realize this.
Come the next structural recession, cybersecurity products could be among the last of expenditures to be cut from the corporate budget, lest firms put themselves in harm’s way.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, CRWD stock comes in as a Strong Buy. Out of 18 analyst ratings, there are 15 Buy recommendations, two Hold recommendations, and one Sell recommendation.
The average CrowdStrike price target is $282.18. Analyst price targets range from a low of $224 per share to a high of $340 per share.
Bottom Line on CrowdStrike Stock
Although it will be tough for the company to justify its hefty multiple, CrowdStrike strikes me as one of few firms that can continue moving forward, even as investors continue taking profits in high-multiple names in 2022.
CrowdStrike has a robust network, defensive characteristics, and brilliant managers, all of which may very well justify CRWD stock’s seemingly absurd valuation.
Download the mobile app now, available on iOS and Android.
Disclosure: Joey Frenette doesn’t own shares of any mentioned companies at the time of publication.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
