Cybersecurity stocks were caught in last week's tech selloff, but Deutsche Bank sees an opportunity in CrowdStrike.
The bank thinks investors are missing the bigger picture: Artificial intelligence is set to trigger a massive surge in cybersecurity spending, and CrowdStrike is positioned to capture a significant share.
Analyst Brad Zelnick upgraded CrowdStrike to Buy from Hold on Monday while raising its price target, derived from a discounted cash flow model, to $300 from $240. His take on CrowdStrike's upside? "You ain't seen nothing yet," he wrote.
As AI tools and agents multiply, enterprise cyber risks could expand sharply, creating "a tsunami of cyber demand," Zelnick wrote. He thinks CrowdStrike's projected $565 billion addressable market by 2034 is likely too conservative. He also thinks CrowdStrike deserves an AI valuation premium similar to those of Palantir and Snowflake.
Another huge advantage for CrowdStrike is its endpoint security, which protects the physical and virtual devices doing the work, like laptops and cloud servers.
Because AI has to run on these machines, CrowdStrike is positioned to monitor threats where AI operates. Its Falcon software can detect suspicious activity as it unfolds.
On top of that, CrowdStrike doesn't just protect everyday office computers. Through its specialized security tools, like Falcon Guardian and SafeMind, and partnerships with Nvidia and CoreWeave, it's expanding protection for AI agents and the infrastructure that runs them.
Looking ahead, capturing a greater share of the cybersecurity market will be crucial for CrowdStrike. Zelnick noted that the company currently holds mid-single-digit market share in the markets it addresses, leaving massive room to expand. As customers aim to cut down on separate security tools, CrowdStrike's single-agent Falcon platform and Falcon Flex pricing could make it the default platform of choice.
The bullish note, however, didn't appear to lift the stock. CrowdStrike stock dipped 0.3% to $249.62 on Monday after closing down 4.1% at $250.43 on Friday. Other cybersecurity stocks also pulled back: Zscaler fell 2.3%, Okta dropped 5.2%, and Palo Alto Networks declined 0.5%.
Despite the pullback, shares have surged nearly 110% this year, including Monday's action, according to Dow Jones Market Data.
Zelnick expects continued business growth, projecting that CrowdStrike will reach its goal of $10 billion in annual recurring revenue by fiscal 2030 comfortably ahead of schedule.
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