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Why Shares of CrowdStrike Jumped 19% Through the First Half of 2021 | The Motley Fool

What happened

The stock of endpoint security software leader CrowdStrike Holdings (NASDAQ:CRWD) jumped 19% through the first half of 2021, according to data from S&P Global Market Intelligence. Endpoint security, which protects devices connected to the internet or an organization’s private network, was a high-growth segment of the cybersecurity space before the pandemic, but COVID-19 turned endpoint software into a staple.

And even as the pandemic starts to ease, it’s leaving its mark on society. Things like remote work and cloud computing are here to stay, and CrowdStrike’s high-growth story remains intact as a result.

So what

For those who invested in CrowdStrike early on after its summer 2019 IPO, it’s been an immensely profitable journey thus far. Shares are now up more than 350% in a little over two years’ time. And there’s plenty left in the tank.

During its fiscal 2022 first quarter (the three months ended April 30, 2021), CrowdStrike said it expects current-year sales to increase no less than 54% from last year to $1.35 billion. This is a highly profitable firm, too. It generated free cash flow (FCF) of $117 million in the first quarter, an enviable FCF profit margin of 39%

Image source: Getty Images.

Growing fast and churning out massive amounts of excess cash that it can use to promote even more growth later on, CrowdStrike is already priced as the most valuable independent cybersecurity firm around. But it still trails the total sales of industry leader Palo Alto Networks (NYSE:PANW), which posted revenue of $4 billion in the last 12-month stretch.  

Now what

CrowdStrike’s security software suite checks off all the right boxes. It’s a cloud-based service, so it’s easy to deploy across devices even if a workforce is remote. It’s a subscription service, so it doesn’t require massive up-front investment to purchase. And new CrowdStrike modules are constantly being developed, scaling the security platform’s capabilities to the needs of large and complex organizations.

All signs point to the company maintaining its sales momentum for some time, and over $1.9 billion in cash (offset by debt of just $738 million) certainly helps its cause.  

With data security demand only rising and poised to continue for as long as the digital world keeps expanding, CrowdStrike remains a top stock in the cybersecurity industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


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