$(CRWD)$ CrowdStrike Holdings Inc. shares rallied Thursday after the cybersecurity company showed Wall Street that it’s diversifying into more of a security platform with several products rather than just an endpoint security company.
CrowdStrikeCRWD,-0.25%stock, which rallied as much as 17% in Thursday trading, closed up 12.5% at $191.02, for their best one-day performance since Feb. 24, whenRussia invaded Ukraine. Shares are still 35% off their record closing high of $293.18, set on Nov. 9, 2021.
Late Wednesday,CrowdStrike forecast a strong outlook for the year and beat Street expectations on fourth-quarter results. The company expects adjusted earnings of 22 cents to 24 cents a share on revenue of $458.9 million to $465.4 million for the fiscal first quarter, and an earnings range of $1.03 to $1.13 a share on revenue of $2.13 billion to $2.16 billion for the year.
With that, analysts hiked their first-quarter estimates to 22 cents a share on revenue of $462.1 million, from a previous 17 cents a share on revenue of $440.3 million. For the year, the Street raised its consensus to $1.07 a share on revenue of $2.13 billion, from a previous 90 cents a share on revenue of $2 billion.
But what made this earnings report unique from past ones is that CrowdStrike broke out numbers for products outside of its core endpoint-security services.
That was enough to prompt BTIG analyst Gray Powell to raise his rating on the stock to a buy with a $257 price target from neutral.
“While the quarter and the guide were very good, the game-changer for us was the incremental disclosure illustrating real traction in tangential markets outside of core endpoint security,” Powell said.
“To be fair, we still see competition ticking higher in CrowdStrike’s core endpoint target market,” Powell said. “But with tangential products currently contributing over 15% of ARR and growing in excess of 100% y/y, we now have hard evidence of a second and even third leg to the story emerging and a higher degree of confidence in CrowdStrike’s long-term growth profile.”
The company said that $157 million of its ARR, or annual recurring revenue, came from its growing IT hygiene, vulnerability management, identity protection and log management products. ARR is a software-as-a-service metric that shows how much revenue the company can expect based on subscriptions.
CrowdStrike also pointed out that 69% of its customers subscribe to four or more of its products, while 57% subscribe to five or more, and 34% subscribe to six or more.
George Kurtz, CrowdStrike’s co-founder and chief executive, told MarketWatch in an interview Thursday that the company released the figures for the other products to show that it’s no longer just an endpoint-security provider.
“That’s indicative of a true platform company, and unfortunately, in our industry, everybody claims to be a platform,” Kurtz told MarketWatch. “But how do you prove that? Everybody says the same thing. You prove it by putting the numbers out.”
In addition to BTIG’s Powell, Morgan Stanley analyst Hamza Fodderwala raised its rating to equal-weight from underweight and hiked his price target to $212 from $180, eliminating Wall Street’s last sell-level rating on the stock currently.
Back in November, Morgan Stanleyinitiated coverage on CrowdStrike with an underweight rating, back when only 22 out of 27 analysts had buy ratings on the stock.
“Improving visibility on broader platform traction plus a [free cash flow]-based valuation offers a more balanced risk-reward in CrowdStrike at current levels, despite the competitive risk,” said Fodderwala.
CrowdStrike reported free cash flow of a record $441.8 million, compared with $292.9 million from fiscal 2021.
Of the 31 analysts who cover CrowdStrike as tracked by FactSet, 29 have buy-level ratings and two have hold ratings. Of those, seven hiked their price targets while 11 lowered their price targets resulting in an average target of $262.52 from a previous $269.71.
With Thursday’s session, CrowdStrike’s stock is down 2% over the past 12 months, versus a 9.3% rise by the S&P 500 indexSPX,-1.30%,a 0.5% gain for the tech-heavy Nasdaq Composite IndexCOMP,-2.18% and a 0.5% loss for the ETFMG Prime Cyber Security ETFHACK,-2.22%.
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