The rising demand for networking and security products led by the COVID-19 crisis is benefiting cybersecurity company CrowdStrike (CRWD). Demand for cyber security measures is on the rise, owing to the prevalence of sophisticated data breaches, which is a positive for CrowdStrike.
According to the research firm MarketsandMarkets, as economies recover from the pandemic, the global cybersecurity market size is projected to witness a CAGR of 9.7% from 2021 to 2026, reaching $345.4 billion at the end of the period. This keeps me bullish on the prospects of CrowdStrike, as it happens to be a leading player in the area, with compelling security solutions.
The company is scheduled to report its second quarter of fiscal 2022 on August 31, and analysts seem to be bullish ahead of the release. Needham analysts, led by Alex Henderson, recently assessed CrowdStrike’s business and reinforced a Buy rating on the stock, while increasing the price target to $335 from $277. “We think CrowdStrike should be able to Beat/Raise sufficiently to satisfy the high expectations and the shares should either rally on the print or soon after,” he explained.
Henderson is encouraged by CrowdStrike’s “strong execution, aggressive growth management style, broadening platform, superb architecture, and opportunities in Kubernetes,” and believes them to be long-term growth drivers. (See CrowdStrike stock chart on TipRanks)
The analyst is positive about the continued growth of CrowdStrike’s base business at a pace of 40% or more over the next 18 months. Additionally, he believes that the company’s Cloud Workload protection platform, Falcon, has the potential to double its revenue contribution annually, hitting 10%-15% of revenues in the next three years.
CrowdStrike’s seamless go-to-market is driving adoption for its products. Henderson also notes that CrowdStrike has recorded 500 basis points advancement in operating margins over the last year despite a 70% growth in revenues. He is certain about the company’s margin expanding capabilities providing consistent upside to the earnings per share. “Recently, CrowdStrike increased its long-term margin target to 20%-22% from 20%. We think it can hit 30%,” he observed.
Henderson acknowledges occasional downtimes as the market fluctuates, but anticipates healthy rewards for investors who buy or hold CrowdStrike’s shares for the long term. “While a period of consolidation is possible, we think CrowdStrike is a unique investment vehicle with exceptional long-term value potential,” he reasoned.
The rest of Wall Street also seems to be optimistic about CrowdStrike with a Strong Buy consensus based on 18 Buys and 1 Hold. The average CrowdStrike price target of $283 implies 0.24% upside potential from current levels.
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