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Proprietary Data Insights Financial Pros’ Top Cybersecurity Stock Searches in the Last Month
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Pros Pick Their Top 5 Cybersecurity Stock
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The global cybersecurity market is expected to grow 10% in 2024 to $208.8 billion and 10.6% annually through 2028. Financial pros are well aware of this megatrend, and they are actively searching for the top cybersecurity stocks. According to our TrackStar data, CrowdStrike (CRWD) is at the top of their list. Soon, the company will join an elite list of businesses as part of the S&P 500. Yet, despite amazing growth, it trades at an astronomical valuation. So what are we to make of this? CrowdStrike’s Business In the fast-paced world of cybersecurity, one company stands out from the crowd with its cutting-edge, AI-powered solutions. CrowdStrike, a global leader in the field, has revolutionized how organizations protect themselves against even the most sophisticated cyber threats. By harnessing the power of machine learning and behavioral analytics, CrowdStrike’s cloud-native platform detects and prevents breaches in real time, providing customers with unparalleled visibility and control. This innovative approach has earned the trust of over 65% of the Fortune 100 and 254 of the Fortune 500, spanning 176 countries. The key to the company’s success lies in its simple business model. Its single platform consolidates multiple security aspects under one roof.
Source: CRWD Q1 2025 Investor Presentation Crowdstrike’s business is divided into two main segments:
In Q1 fiscal year 2025, the company continued to soar, with total revenue growing 33% year-over-year to $921 million. Subscription revenue rose 34% to $872 million, while ARR reached an impressive $3.65 billion, a 33% increase from the previous year. The secret is the compan’ys ability to attract and retain customers, with many eagerly adopting multiple modules. As of Q1 fiscal year 2025, 65%, 44%, and 28% of subscription customers had embraced five, six, and seven or more modules, respectively, a testament to the platform’s value and effectiveness. Financials
Source: Stock Analysis CrowdStrike has seen unprecedented growth, with revenues climbing +60% annually over the last five years. Gross margins improved while operating and profit margins turned positive. And free cash flow exploded in 2019. Since 2022, total cash from operations has more than doubled to $1.25 billion. With hardly any debt, management has plowed that money back into acquisitions and Capex while putting any additional funds into cash, which currently sits at $3.70 billion. At some point, we’d like to seem them use that to repurchase shares. Valuation
Source: Seeking Alpha CrowdStrike’s P/E ratio looks out of whack, as it does with many newer tech companies. Yet, its price to cash ratio at 73x is more than twice that of nearly every competitor. And that number isn’t expected to improve much this year despite forecasted revenue growth of 31%. So, the question is are you getting enough growth to justify the premium price? Growth
Source: Seeking Alpha CrowdStrike’s past and forward revenue growth is at the top, along with Zscaler (ZS). Palo Alto Networks (PANW) and Fortinet (FTNT) have half the growth and half the price to cash multiple. So, we can say the valuations take growth into account fairly consistently amongst the group. Profitability
Source: Seeking Alpha Profit margins aren’t great for this group since many spend a lot upfront on software development and infrastructure, which depreciates over time, even when the company’s cash flow is positive. However, it’s worth noting that CrowdStrike’s free cash flow margin is the highest of its peers, albeit by a few percentage points.
Our Opinion 7/10 While the cybersecurity stocks are valued consistently, CrowdStrike’s higher cash flow margin resonates with us. The company’s single-source platform gives it a leg up on the competition. We’d use the stock’s volatility to your advantage and wait for pullbacks to take a position rather than trying to chase price after this latest run. |
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