Company Reports

We are maintaining our $300 fair value estimate for narrow-moat CrowdStrike after the firm kicked off fiscal 2025 with strong financial results slightly ahead of our above-consensus expectations. While security companies that have reported in recent weeks have been a mixed bunch, with certain vendors calling out a tough macroenvironment and elongated sales cycles, we are impressed by CrowdStrike’s ability to execute well despite the macro challenges. From a valuation perspective, we view CrowdStrike’s shares as fairly valued and trading in the 3-star range. While we continue to view CrowdStrike as a high-quality security vendor with an impressive track record, we’d point investors seeking cybersecurity exposure toward Palo Alto and Fortinet, two wide-moat security vendors currently trading in the 4-star range.

We are raising our fair value estimate for narrow-moat CrowdStrike materially to $300 from $220. The main driver behind our fair value hike is a revised outlook on the firm’s long-term growth prospects as customers increasingly consolidate their cybersecurity spending on large vendors such as CrowdStrike. Increased adoption of CrowdStrike’s newer offerings, including cloud, identity, and security operations, is implied in our new growth outlook. We believe CrowdStrike, much like its large security peers, stands to materially benefit as customers increasingly turn to its platform for needs beyond its traditional endpoint security business. We believe this consolidation of security spending will also allow CrowdStrike to fortify its economic moat by increasing its penetration into a customer’s ecosystem, making churn less likely.

We view CrowdStrike as a leader in endpoint security, a prominent part of the cybersecurity stack that protects an enterprise’s endpoints from nefarious activity. As enterprises undergo digital transformations and cloud migrations, we foresee endpoint security further gaining wallet share of an enterprise’s security spend. Within this growing market, CrowdStrike has emerged as a leader and we think the stickiness of its platform, Falcon, is clear in the firm’s impressive gross and net retention metrics. Beyond endpoint, CrowdStrike has been enhancing its security portfolio by adding cloud security, identity security, and security operations offerings to its Falcon platform. These newer initiatives have garnered strong customer traction, allowing CrowdStrike an opportunity to embed itself further into its customer’s security ecosystems.

We view CrowdStrike as a leader in endpoint security, a prominent part of the cybersecurity stack that protects an enterprise’s endpoints from nefarious activity. As enterprises undergo digital transformations and cloud migrations, we foresee endpoint security further gaining wallet share of an enterprise’s security spend. Within this growing market, CrowdStrike has emerged as a leader and we think the stickiness of its platform, Falcon, is clear in the firm’s impressive gross and net retention metrics. Beyond endpoint, CrowdStrike has been enhancing its security portfolio by adding cloud security, identity security, and security operations offerings to its Falcon platform.

We are raising our fair value estimate for narrow-moat CrowdStrike to $220 from $163 as we raise our long-term growth and profitability outlook following the firm’s strong third-quarter results. While macroeconomic headwinds continue to hamper customer decision-making and elongate sales cycles, we believe CrowdStrike’s strong execution, sticky platform, and expanding market opportunity stand to deliver long-term returns for shareholders. As the security landscape becomes more complex, we believe larger players like CrowdStrike stand to benefit from increased customer spending on security. In addition, by expanding beyond its core endpoint security market, we believe CrowdStrike can continue to solidify its economic moat by increasing its customer penetration and unlocking more cross/up-selling opportunities.

We are maintaining our $163 fair value estimate for narrow-moat CrowdStrike after the firm closed out its second quarter of fiscal 2024 with financial results largely in line with our prior estimates. While near-term macro pressures continue to affect customer buying decisions, we believe investors should focus their attention on CrowdStrike’s long-term market opportunity which continues to expand as the firm invests in growing areas such as identity, cloud security, and security operations. We reiterate our view that in a security landscape littered with bad actors using emerging technologies such as generative artificial intelligence for nefarious purposes, customers will expand their usage of security vendors. In turn, we believe CrowdStrike’s Falcon platform is well-positioned to capitalize on the increased appetite for security solutions over the medium to long term. With shares trading slightly up afterhours, we believe CrowdStrike is fairly valued and is trading in the 3-star range.

We lift our fair value estimate for narrow-moat CrowdStrike to $163 from $156 after the firm reported strong financial results and guidance ahead of our prior estimates. While general turbulence continued to affect the firm’s near-term financials, we believe CrowdStrike’s growing addressable market, sticky products, and wide range of solutions are all positive indicators for the firm’s long-term potential. We believe in a cybersecurity landscape in which nefarious actors are increasingly leveraging artificial intelligence/machine learning tools to exploit security vulnerabilities in organizations, CrowdStrike’s Falcon platform is well-positioned to capitalize on increased demand for cybersecurity solutions. We believe investors were disappointed with some forward-looking metrics leading to a sharp selloff in CrowdStrike’s shares afterhours. We believe this selloff has created upside for investors looking to get high-quality SaaS/cybersecurity exposure.

We view CrowdStrike as a leader in endpoint security, a prominent part of the cybersecurity stack that protects an enterprise’s endpoints from nefarious activity. As enterprises undergo digital transformations and cloud migrations, we foresee endpoint security further gaining wallet share of an enterprise’s security spend. Within this growing market, CrowdStrike has emerged as a leader and we think the stickiness of its platform, Falcon, is clear in the firm’s impressive gross and net retention metrics.

We are maintaining our $156 fair value estimate for narrow-moat CrowdStrike after the firm closed out its fiscal 2023 with strong results offset by continued macro pressures. While near-term macro tightness continues to remain front of mind for many investors, we’d highlight the tremendous opportunity CrowdStrike has in front of it as endpoint security continues to gain wallet share of the overall enterprise security spend. We believe the firm, with its sticky Falcon platform which exhibits potent network effects, is well-positioned to capitalize on the increased number of endpoints every business has due to the continued digitization of IT architecture. With shares up more than 5% afterhours, we believe there is still upside for investors looking to get high-quality SaaS exposure.

We view CrowdStrike as a leader in endpoint security, a prominent part of the cybersecurity stack that protects an enterprise’s endpoints from nefarious activity. As enterprises undergo digital transformations and cloud migrations, we foresee endpoint security further gaining wallet share of an enterprise’s security spend. Within this growing market, CrowdStrike has emerged as a leader and we think the stickiness of its platform, Falcon, is clear in the firm’s impressive gross and net retention metrics.

We are maintaining our $156 fair value estimate, narrow economic moat rating, positive moat trend rating, high uncertainty rating, and exemplary capital allocation rating for the firm. We continue to have confidence in CrowdStrike's ability to drive long-term returns as the firm's solutions continue to benefit from secular tailwinds.

We view CrowdStrike as a leader in endpoint security, a prominent part of the cybersecurity stack that protects an enterprise’s endpoints from nefarious activity. As enterprises undergo digital transformations and cloud migrations, we foresee endpoint security further gaining wallet share of an enterprise’s security spend. Within this growing market, CrowdStrike has emerged as a leader and we think the stickiness of its platform, Falcon, is clear in the firm’s impressive gross and net retention metrics.

We are lowering our fair value estimate for narrow-moat CrowdStrike to $156 from $196 after the company reported third-quarter financial results below our estimates coupled with weak guidance for the upcoming quarter. While last quarter remained strong despite the macroeconomic headwinds, this quarter painted a different picture for CrowdStrike, with longer sales cycles and the firm's net new annual recurring revenue, or ARR, coming in lighter than expected. While we continue to view CrowdStrike as a leader in endpoint security we expect elevated macroeconomic uncertainty to weigh down on the company's results for the next few quarters. Despite our fair value revision, we think CrowdStrike is trading at a discount with overly punitive damage inflicted on the firm's share price as investors have fled technology companies.

CrowdStrike is a leader in endpoint security, a necessity that aids in protecting devices and networks, and its threat hunting and breach remediation services are topnotch. While nefarious threat actors are continually upping their attack methodology to create zero-day attacks and are using the rise in entities using cloud-based resources to their advantage, CrowdStrike developed a methodology to turn any entities' weak-point into better protection for all of its clients. CrowdStrike's cloud-delivered endpoint protection platform continuously ingests data from all of its installed agents to enhance its protection solutions while keeping all users up to date against the latest threats. We believe that CrowdStrike's customer base, revenue, and margins will experience profound growth throughout the 2020s as customers update their endpoint and workload security requirements in a hybrid-cloud world.

We are maintaining our $196 fair value estimate for narrow-moat CrowdStrike after the company reported second-quarter financial results topping our expectations. We continue to view CrowdStrike as a leader in endpoint security and expect the firm to maintain its torrid growth. In addition, we believe customers will continue to rapidly adopt CrowdStrike's endpoint security platform to alleviate security complexity, while CrowdStrike benefits from locking customers into its ecosystem in the longer term. At the same time, we think that CrowdStrike's current market price has this leadership position and strong growth prospects baked in, and we view the firm's shares as fairly valued.

We are lowering our fair value estimate for narrow-moat CrowdStrike down to $196 from $225 as we are taking a more conservative stance on our long-term profitability assumptions. Nonetheless, our new fair value estimate is still solidly above the company’s current share price. We continue to believe that the market’s reaction to recent macroeconomic events has been overdone, with many high-quality software names put to the sword as investors fled from tech.

CrowdStrike is a leader in endpoint security, a necessity that aids in protecting devices and networks, and its threat hunting and breach remediation services are topnotch. While nefarious threat actors are continually upping their attack methodology to create zero-day attacks and are using the rise in entities using cloud-based resources to their advantage, CrowdStrike developed a methodology to turn any entities' weak-point into better protection for all of its clients. CrowdStrike's cloud-delivered endpoint protection platform continuously ingests data from all of its installed agents to enhance its protection solutions while keeping all users up to date against the latest threats. We believe that CrowdStrike's customer base, revenue, and margins will experience profound growth throughout the 2020s as customers update their endpoint and workload security requirements in a hybrid-cloud world.

We are maintaining our $225 fair value estimate for narrow-moat CrowdStrike after its first quarter results breezed by our expectations for revenue growth and adjusted earnings. We think that CrowdStrike shares, which dropped slightly after the print, offer an attractive investment opportunity. While we think there are no shortage of growth prospects with its leadership position in endpoint security and incident remediation services, CrowdStrike is wisely expanding its addressable market within areas of IT management. We believe customers will continue to rapidly adopt CrowdStrike's endpoint security platform to alleviate security complexity, while CrowdStrike benefits from locking customer into its ecosystem in the longer-term.

We are reiterating our fair value estimates for wide-moat network security vendors Check Point Software Technologies at $140, Fortinet at $340, and Palo Alto Networks at $585 after these more-established firms fell about 20% over the last month. We are also reaffirming our fair value estimates for narrow-moat cloud-based security firms CrowdStrike Holdings at $225, Okta at $280, and Zscaler at $265 after these higher-growth firms retracted by almost 40% over the last month. Our top pick is Okta, but all are trading at attractive valuations, albeit with different growth profiles.

We are maintaining our $225 fair value estimate for narrow-moat CrowdStrike Holdings after its 2022 investor briefing, and we view shares as fairly valued. While we were impressed with the technology demos and path management laid out to achieve hit $3 billion in annualized recurring revenue in fiscal year 2024 and then $5 billion in ARR by fiscal year 2026, we still suspect that these targets are conservative and CrowdStrike will overachieve. We expect CrowdStrike's leadership position within endpoint detection and response, the burgeoning space of extended detection and response, and additional modules in areas like log ingestion and identity to fuel durable growth that easily outpaces its core markets. The company's single agent approach, regardless of the modules adopted, and collecting data once to use multiple times continue to make CrowdStrike standout and be a share gainer.