CrowdStrike Holdings, Inc. (CRWD), a global cybersecurity leader, is scheduled to release financial results for its fiscal 2024 third quarter after the market closes on Tuesday, November 28, 2023. Analysts expect the company’s revenue and EPS for the third quarter (ended July 2023) to increase 33.8% and 84.9% year-over-year to $777.38 million and $0.74, respectively.

Moreover, CrowdStrike reported better-than-expected financial results in the last reported quarter. The security software company posted fiscal 2024 second-quarter revenue of $731.63 million, beating the analysts’ expectations of $724.44 million. That compared to $506.20 million in the second quarter of fiscal 2023.

CRWD’s annual recurring revenue (ARR) grew 37% year-over-year and reached $2.93 billion as of July 31, 2023, of which $196.20 million was net new ARR added during the quarter.

The cloud company further reported an adjusted EPS of $0.74, compared to the consensus estimate of $0.56 and up 105.6% from the prior year’s quarter. During the second quarter, CRWD delivered a record cash flow from operations of $245 million and a record free cash flow of $189 million.

“CrowdStrike delivered strong growth at scale, exceeding our guidance across both top and bottom line metrics in the second quarter,” said George Kurtz, CRWD’s President, CEO, and Co-Founder.

“The AI-powered Falcon platform’s native capabilities across our cloud, identity, and next-gen SIEM businesses are unique in the market, in aggregate contributing well over half a billion dollars in ending ARR. Our platform strategy sets us apart from the competition, resulting in high win rates as customers rapidly embrace Falcon to consolidate vendors, lower TCO and achieve better security outcomes,” he added.

After earnings topped estimates, CRWD raised its outlook for the full fiscal year 2024. For the third quarter of fiscal 2024, the company expects revenue to be between $775.40 million and $778 million. Non-GAAP income from operations and net income attributable to CrowdStrike are expected to be $154.40-156.30 million and $179.80-$181.80 million, respectively.

Further, the cybersecurity company expects non-GAAP net income per share attributable to CrowdStrike common stockholders to be $0.74.

For the full year 2024, CRWD anticipates its revenue and non-GAAP income from operations to be $3.03-$3.04 billion and $601.30-$610.50 million, respectively. Also, non-GAAP net income per share attributable to CrowdStrike is expected to be $680.50-$689.70 million and $2.80-$2.84 per share, respectively.

Shares of CRWD have gained 15.6% over the past month and 41.2% over the past six months to close the last trading session at $210.66. The stock has surged 104% year-to-date.

Here’s what could influence CRWD’s performance in the upcoming months:

Positive Recent Developments

On November 22, CRWD announced that its AI-powered cybersecurity offering for small and medium businesses (SMBs), CrowdStrike Falcon Go, is officially available on Amazon Business. This marks the first CrowdStrike offering on Amazon’s business-to-business (B2B) store and the broadest dedicated distribution channel for CRWD’s growing SMB offerings to date.

Moreover, this game-changing CRWD offering, CrowdStrike Falcon Go, was launched on November 15. With a few simple clicks, SMBs can quickly and easily deploy industry-leading protection to stop the modern cyberattacks that ineffective antivirus products may miss.

Robust Financials  

CRWD’s revenue increased 36.7% year-over-year to $731.60 million for the fiscal 2024 second quarter ended July 31, 2023. Its non-GAAP income from operations grew 78.4% from the year-ago value to $155.70 million. Also, non-GAAP net income attributable to CrowdStrike was $180 million, compared to $85.90 million in the second quarter of fiscal 2023.

Furthermore, non-GAAP net income attributable to CrowdStrike per share was $0.74, an increase of 105.6% year-over-year. Net cash generated from operations was $244.80 million, compared to $209.90 in the previous year’s period. Its free cash flow came in at $188.70 million, up 39% year-over-year.

Favorable Analyst Estimates

Analysts expect CRWD’s revenue to grow 35.6% year-over-year to $3.04 billion for the fiscal year ending January 2024. The consensus earnings per share estimate of $2.83 for the ongoing year indicates an 83.8% year-over-year increase. Moreover, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.

In addition, the company’s revenue and EPS for fiscal year 2025 are expected to grow 28.6% and 24.6% year-over-year to $3.91 billion and $3.53, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, CRWD is currently trading at 74.45x, 224.5% higher than the industry average of 22.94x. Also, the stock’s forward EV/Sales and EV/EBITDA of 15.78x and 65.85x are significantly higher than the industry averages of 2.63x and 14.63x, respectively.

Also, the stock’s forward Price/Sales and Price/Cash Flow multiples of 16.55 and 47.27 are 529.7% and 119.8% higher than the respective industry averages of 2.63 and 21.51.

Mixed Profitability

CRWD’s trailing-12-month gross profit margin of 74.04% is 52.1% higher than the industry average of 48.67%. Its trailing-13-month levered FCF margin of 33.44% is 307.8% higher than the industry average of 8.20%. However, the stock’s trailing-12-month EBIT margin of negative 5.78% compared to the 4.69% industry average.

Additionally, CRWD’s trailing-12-month net income margin of negative 3.54% is lower than the industry average of 1.77%. The stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 6.10%, negative 4.08%, and negative 1.69% are compared unfavorably to the industry averages of 0.80%, 2.60%, and 0.07%, respectively.

POWR Ratings Reflect Uncertainty

CRWD’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. The stock has an A grade for Growth and a B for Sentiment, consistent with its solid financials and optimistic analyst estimates.

However, CRWD has a D grade for Stability, justified by its 24-month beta of 1.48. Also, the stock has a D grade for Value, in sync with its higher-than-industry valuation.

Within the Software - Security industry, CRWD is ranked #10 out of 22 stocks.

Click here to access all CRWD’s POWR Ratings.

Bottom Line  

CRWD surpassed analysts’ fiscal 2024 second-quarter expectations for revenue and earnings. Also, the cloud-based cybersecurity leader issued optimistic financial guidance for the third quarter and full year. However, given its elevated valuation, mixed profitability, and enhanced volatility, it could be wise to hold CRWD and wait for a better entry point in the stock.

Stocks to Consider Instead of CrowdStrike Holdings, Inc. (CRWD)

Given its uncertain short-term prospects, the odds of CRWD outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three A-rated (Strong Buy) or B-rated (Buy) stocks from the Software - Security industry instead:

Trend Micro Incorporated (TMICY)

Check Point Software Technologies Ltd. (CHKP)

Tenable Holdings, Inc. (TENB)

To explore more A and B-rated software stocks, click here.

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CRWD shares were unchanged in premarket trading Monday. Year-to-date, CRWD has gained 100.08%, versus a 20.38% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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