Crowdstrike will be a winner in 2022, this portfolio manager says

It’s been an up and down year for cybersecurity name CrowdStrike (CrowdStrike Holdings Stock Quote, Charts, News, Analysts, Financials NASDAQ:CRWD), but sector tailwinds should lift the stock higher in 2022. So says Kim Bolton of Black Swan Dexteritas who has nominated CrowdStrike as one of his top picks for the year ahead.

“A theme we see going into 2022 is cybersecurity, ransomware and so on, and CrowdStrike provides cloud-delivered solutions for endpoint and cloud work and workload protection,” said Bolton, speaking on BNN Bloomberg on Wednesday.

California-based CrowdStrike is about ten years old now as a company but the stock has only been trading for a year and a half since CRWD IPO’d on the NASDAQ. On June 12, 2019, the stock almost doubled on its first day of trading, going from an initial $34 to $63.50 and giving the company a market cap of $11.4 billion. Fast forward to the end of 2021 and CrowdStrike is currently trading just above $200. That’s a lot of ground to cover in a short span of time and has handsomely rewarded early investors. (All figures in US dollars.)

And while 2021 wasn’t the best — the stock is currently down about two per cent year-to-date — Bolton says there’s room for CrowdStrike to grow in 2022.

“Everyone has been gravitating toward the cloud and CrowdStrike is the leader — and don’t just listen to me. You can listen to IDC And Gartner who actually have CrowdStrike as the most visionary vendor when it comes to endpoint workload protection,” Bolton said. “They’re in the cloud and they’re in the perfect place.”

“Plus, they’re second only to Microsoft in their execution of the cybersecurity side,” he said. “You’ve actually had a nice little pullback recently, and we have a 12-month price target of $315.”

CrowdStrike said earlier this month that it was recognized as a top customer choice among endpoint protection platform in a review by Gartner Peer Insights. CrowdStrike received a 4.8/5 rating based on 260 reviews and was recorded as the highest in “Willingness to Recommend” from customers at 98 per cent.

“As more systems move towards cloud-based environments, this shift requires a single platform that lowers costs, limits data complexity, and mitigates multiple software use and that is where CrowdStrike Falcon wins. This recognition is testament to the focus and vision CrowdStrike has in the Asia Pacific region which is a key pillar in the company’s overall growth strategy,” said Fabio Fratucello, chief technology officer for Asia Pacific and Japan at CrowdStrike, in a press release.

The company reported its third quarter fiscal 2022 financials on December 1 where it showed revenue up 63 per cent year-over-year to $380.1 million, with subscription revenue being the bulk of it at $357.0 million. Annual recurring revenue grew by 67 per cent to $1.51 billion while the company sported a non-GAAP net income of $41.1 million or $0.17 per share compared to $18.6 million or $0.08 per share a year earlier. Both top and bottom numbers beat analysts’ consensus estimates of $363.6 million in revenue and EPS of $0.10 per share.

CrowdStrike said it added 1,607 net new subscriptions over the Q3 to hit 14,687 in total, and management increased its outlook for the full fiscal 2022, calling for between $1.427 billion and $1.433 billion in revenue (previously between $1.391 billion and $1.409 billion) and between $0.57 and $0.59 per share for the full year (previously between $0.43 and $0.49 per share).

“Our outstanding results this quarter demonstrate the flywheel effect of our platform and reflect continued strong customer adoption for our core products in addition to the growing success of our newer product initiatives including identity protection, log management and cloud. With our leading technology, unmatched platform and approach to stopping breaches, we continue to eclipse our competitors and extend our leadership position,” said George Kurtz, CrowdStrike co-founder and CEO, in a press release.

CrowdStrike’s share price dipped in mid-November after Morgan Stanley initiated coverage of the stock with an “Underweight” rating and $247 price target. Analyst Hamza Fodderwala said despite being a market leader in cloud-based endpoint protection competition in the space is strong from companies like SentinelOne which offers a lower price structure. The analyst also commented that CrowdStrike’s share price has had its share of wins over the previous 12 months.

“We think this competitive dynamic will make sustaining the current pace of share gains more difficult and drive uncertainty on the pace of topline deceleration through 2022, particularly as WFH-driven tailwinds since last year begin to normalize,” Fodderwala said in a report.