CrowdStrike Q2: Still Buy Rating, Balanced Risk-Reward Profile

We remain buy-rated on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) post Q2 FY2024 earnings results. We continue to see a more volatile back end of the year as the pace of cloud optimization efforts remains unclear due to macro uncertainty, but we think CRWD will remain one of the more resilient names in the cybersecurity space. Management is treading the macro environment carefully, edging FY24 revenue guidance higher in H1FY24; in 4Q23, FY24 revenue guidance was $2,955.1 - $3,014.8M but was raised to $3,000.5 - $3,036.7M last quarter and then again to the range of $3,030.7 - $3,042.9M yesterday. Our bullish sentiment is not driven by CRWD's A.I. capabilities, as we don't expect A.I.-driven revenues to be realized under the current macro environment; instead, our buy rating is based on our belief that CRWD will continue to report solid double-digit Y/Y revenue growth and expect to see sequential revenue growth to pick back up to the higher single-digit range in 3Q23.

We still have near-term concerns for the stock but believe the macro weakness has been factored into the stock over the past quarter; this quarter, CRWD declined 7%, underperforming the S&P 500 (SP500) by 15%. CRWD ran up in 1H23, growing 42% YTD, outperforming the S&P 500 by around 24%; we think the bulk of the stock's YTD rally was driven by investor confidence in A.I. growth potential. We're now more constructive on CRWD as we see a more balanced risk-reward profile for the stock in 2H23 and continue to be cautiously optimistic about CRWD's near-term A.I.-related sales. We expect CRWD to continue outperforming the cybersecurity peer group into 2024. Still, we think Palo Alto Networks (PANW) continues to be the better-positioned name in the space for the near term.

The following graph outlines CRWD's YTD performance against the peer group, including PANW, UiPath (PATH), Check Point Software Tech (CHKP), Zscaler (ZS), the S&P 500, and Fortinet (FTNT). $CrowdStrike Holdings, Inc.(CRWD)$ $UiPath(PATH)$ $Check Point(CHKP)$ $Zscaler Inc.(ZS)$ $Fortinet(FTNT)$

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SOURCE: SEEKINGALPHA