To The Moon

$CrowdStrike Holdings, Inc.(CRWD)$ 

CrowdStrike (CRWD) has been in my portfolio since 2020 and has been my favourite cybersecurity company! CRWD's disruptive platform has made it a leader in the Endpoint Security market, enabling it to efficiently penetrate core and adjacent markets. Due to its strong unit economics and go-to-market efficiency, CrowdStrike has more flexibility than its peers in driving incremental profitability, and has consistently exceeded expectations and is on track to achieve its goal of $5bn of ARR by FY26.

Highly favourable Gartner ratings!

For consecutive years since its initial public offering in 2019, CRWD has consistently received high ratings from Gartner. In 2022, it was ranked as the top performer for completeness of vision and placed second, only after Microsoft, in terms of ability to execute.

According to Gartner's assessment, CRWD's strengths lie in several key areas. Firstly, the company's innovation and market understanding are highly regarded, with a wide range of offerings to support its position. CRWD has also received positive feedback from customers, who have praised the company's customer experience and overall viability. Even with increased competition from newer market entrants, CRWD has continued to perform well in 2022. The company's expertise in managed detection and response (MDR) has also been highlighted as a strength. Moreover, the acquisition of Humio is seen as a positive move for CRWD, providing a strong foundation for extended detection and response (XDR) expansion.

Endpoint security is crucial against ransomware!

Endpoint security remains one of the top spending priorities for CIOs. This is not surprising given the critical role that endpoints play in expanding attack surfaces that enterprises must manage. Endpoints are frequently compromised in ransomware attacks, which can be some of the most financially and reputationally damaging security breaches.

As demonstrated by the recent ransomware-induced outage at Dish Network, the endpoint real estate within enterprise networks is crucial to protect. Legacy antivirus-focused endpoint solutions have proven ineffective in the face of recent ransomware activity. On the other hand, CRWD's AI-driven platform is an ideal solution extended beyond the endpoint and enable more effective detection and response capabilities through robust data ingestion.

CRWD still doing well despite fierce competition!

Investors have been concerned about the competitive landscape in CrowdStrike's markets, particularly regarding competition from Microsoft. However, recent data from IDC shows that CRWD is still outpacing its peers. The cost of CRWD’S platform is more than justified by its efficacy and efficiency, and that many investors fail to fully consider the cost savings that CRWD can provide (such as reducing the need for additional headcount).

Furthermore, there is significant room for additional market share gain in CRWD's favor, given the amount of market share that is still held by legacy vendors such as McAfee (Trellix) and Symantec (Broadcom). Despite its growth over the past few years, CrowdStrike still only accounts for 17.7% of the market, according to IDC. Investors also fails to consider the potential for growth in adjacent markets such as Cloud Workload, Identity, and XDR, which may be significant opportunities for CRWD. Therefore, CRWD is still likely a primary beneficiary of the ongoing market share grab in this space.

Conservative result and earnings outlook

CRWD will be reporting its earnings on 7th March 2023 Tuesday after market close. 

CRWD has already issued a warning regarding their net new ARR trajectory through FY24 due to spending delays for non-enterprise accounts, OPEX timing issues for larger customers, and phased deals in the market. CRWD will most likely focus more on operating efficiency during result briefing. Based on CRWD’s share price, the market seems to have already punished it.

Hence any positive surprise will result in a share price re-rating, including the potential the ongoing enterprise traction and potential margin expansion from CRWD’s efficient customer acquisition model. 

CrowdStrike has been exceeding expectations in terms of growth, profitability, and free cash flow since going public, so my bet is on it :)

@TigerStars @Daily_Discussion