A Member of Pat McKeough’s Inner Circle recently asked for his advice on a cybersecurity company that protects customers against endpoint and cloud data attacks.
Pat likes the firm’s rising revenue and earnings as well as expanding client base. However, he notes its growth rate will likely slow as the pandemic further eases.
CrowdStrike Holdings Inc. (Symbol CRWD on Nasdaq; www.crowdstrike.com), is an Internet-based cybersecurity specialist. The company’s CrowdStrike Falcon platform aims to protect customers against cyberattacks on their endpoints and cloud data.
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Endpoint security lets companies track, monitor and keep secure their employees’ mobile devices.
CrowdStrike went public in June 2019 at $34 a share. Over the past five years, its revenue has risen sharply, from just $52.7 million in 2016 (fiscal year ended January 31, 2017) to $874.4 million in 2020.
Excluding one-time items, the company lost money in the first four of those five years. Specifically, those losses were $108.4 million, or $2.73 a share, in 2016; $141.3 million, or $3.38 a share, in 2017; $119.0 million, or $2.65 a share, in 2018; and $62.6 million, or $0.42 a share, in 2019. CrowdStrike then reported a profit in 2020 of $62.6 million, or $0.27 a share (on more shares outstanding).
In the three months ended April 30, 2021, revenue jumped 70.1%, to $302.8 million from $178.1 million a year earlier. The company continued to sign up new clients at a rapid pace: it added 1,524 net-new subscription customers in the latest quarter, including 119 with the acquisition of Humio (see below). As of April 30, 2021, subscription customers totaled 11,420. That represented 82% growth year-over-year.
Inner Circle: Earnings rise and a new acquisition looks promising
Excluding one-time items, the company earned $23.3 million, or $0.10 a share, in the latest quarter. That’s up sharply from $4.5 million, or $0.02.
Meanwhile, on February 18, 2021, CrowdStrike announced the $400 million acquisition of U.K.-based data log management startup Humio Ltd. Humio, launched in 2016, provides products to simplify streaming, aggregating, and managing data logs collected from large cloud-based enterprise networks.
Data logging is the process of collecting and storing data over a period of time to analyze specific trends or record the data-based events/actions of a system, network or IT environment. It enables the tracking of all interactions through which data, files or applications are stored, accessed or modified.
Most companies now have to pick and choose what to log and how long to keep it. Humio gives CrowdStrike unlimited logging capabilities, so its clients don’t have to make those choices.
CrowdStrike’s stock has soared 586.9% since its March 2020 low. That’s because the massive shift to working from home has spurred demand for enterprise end-point security. The company’s growth rate will slow as the pandemic further eases, but the need for cybersecurity is expanding rapidly. Many of the company’s new customers are likely to keep using its services.
Recommendation in Pat’s Inner Circle: CrowdStrike Holdings Inc. is a hold.
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