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Since the artificial intelligence (AI) frenzy began in 2023, semiconductor giant Nvidia (NVDA) has emerged as the clear winner. The stock has gained an eye-catching 753% in the last two years, and barreled into the mid-week holiday by knocking Microsoft (MSFT) out of its top spot as the most valuable publicly traded company in the world.
While many investors may believe they've missed out on this extraordinary stock, numerous other AI stocks have the potential to be long-term winners. One of those is cybersecurity company Crowdstrike (CRWD), which provides cloud-native endpoint security solutions.
With increasing digitization, cyber threats have also been on the rise, necessitating protection. Ever since its initial public offering (IPO) in 2019, Crowdstrike's stock has shown robust growth, reflecting investor confidence in its business model and market potential in the cybersecurity space.
CRWD stock has risen by 471.7% over the last five years. Strong revenue growth and expanding market share have driven the stock price up. The company's revenue has climbed from $249.8 million in fiscal 2019 to $3.06 billion in fiscal 2024. Analysts expect its revenue to grow by double digits over the next two years, and rate the stock as a "strong buy" overall.
Valued at a market cap of $95 billion, the stock has gained 52.5% year-to-date, easily outperforming the broader market.
Crowdstrike’s Growth is Undeniably Impressive
Recently, Crowdstrike reported another blowout quarter. Total revenue in the first quarter of fiscal 2025 jumped 33% year on year to $921 million. The company's subscription model has proven highly successful, with a rapidly expanding customer base that generates recurring revenue. In Q1, annual recurring revenue (ARR) rose 33% to $3.65 billion.
The market has warmly received the company’s AI-powered Falcon platform. CEO George Kurtz stated, "The Falcon platform’s differentiated architecture creates a wide competitive moat and uniquely enables CrowdStrike to solve the industry’s biggest cybersecurity, IT, and data problems.”
While initially prioritizing growth over profitability, Crowdstrike has begun to report consistent profits and free cash flow, which are critical in instilling investor confidence in the company. Q1 marked its fifth consecutive quarter of GAAP (generally accepted accounting methods) profitability.
Furthermore, adjusted net profits were $0.93, up from $0.57 in the same quarter last year. Both revenue and earnings exceeded Wall Street’s expectations. The company also generated free cash flow of $322.5 million, an increase of 42%. Plus, on the balance sheet, cash, cash equivalents, and short-term investments showed a total of $3.7 billion.
The Future Looks Bright For Crowdstrike
Crowdstrike has expanded its market reach and product capabilities through strategic partnerships and integrations with major cloud providers and other technology platforms. The company has formed partnerships with Amazon (AMZN), Nvidia, Tata Consultancy Services (TCS), and Alphabet (GOOGL), among others, to strengthen the market position of the Falcon platform.
Management expects revenue to grow 29% to 31% in fiscal 2025, while adjusted earnings are projected to rise 22% to 28% year on year. Analysts predict earnings will grow by 29.8% in fiscal 2025, followed by a 23.0% increase in fiscal 2026. That forecast compares to a $3.09 loss in fiscal 2024.
Management and analyst estimates appear to be achievable, given the rapid increase in cybersecurity demand and for the company’s AI-powered platform.
According to MarketsandMarkets, the global cybersecurity market could grow at a compounded annual growth rate of 9.4% and reach $298.5 billion by 2028.
What Does Wall Street Say About Crowdstrike Stock?
Overall, Crowdstrike stock is a “strong buy” on Wall Street. Of the 41 analysts that cover CRWD stock now, 36 have a “strong buy” rating, three suggest a “moderate buy,” and two recommend a “hold.”
Following its ongoing rally, the stock is now trading close to analysts' average price target of $395.51. However, the Street-high target price of $435 implies the stock could rally 11.7% in the next 12 months.
The Bottom Line on CRWD Stock
Crowdstrike is undeniably expensive now, trading at 97 times forward 2025 earnings and 23 times forward sales. However, given the company's position in the cybersecurity market and the increasing demand for cybersecurity measures, it may be worthwhile to pay the premium now.
As cybercrimes become more advanced, the costs of data breaches could place a significant burden on organizations in the future. Organizations will not hesitate to protect themselves with effective cybersecurity measures offered by companies such as Crowdstrike.
According to Statista, global cybercrime costs are expected to reach $13.8 trillion by 2028. Crowdstrike is well positioned to capitalize on this rapidly expanding market thanks to AI, a stable business model, and a strong balance sheet, making it a worthwhile long-term buy-and-hold stock.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
