As everything becomes digital, digital security becomes ever more important. That’s why the global cybersecurity market size is estimated to grow from $154 billion in 2022 to $425 billion by 2030 – a respectively 13.8% annual growth rate.
The advance of AI is also expected to be a major growth catalyst for this industry. With generative AI capable of being exploited to write malicious programs, this will no doubt create an arms race between the malicious actors and the cybersecurity defenders – which will only boost the industry.
Today’s daily stock pick is one that has captured a leading in a specific cybersecurity niche – a niche that is rapidly expanding. It boasts robust fundamental growth, proven skill at upselling its client, and is also trading at bottom-end valuation.
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CrowdStrike Holdings, Inc. (CRWD)
CRWD is an American cybersecurity company that’s the leader in endpoint security – essentially protecting the “ends” of the networks like phones or laptops. The company has been ranked as the market leader in endpoint security 3 years in a row – thanks to its AI and machine learning powered Falcon platform.
But endpoint security is just the foundation for CRWD. The company is masterful at cross-selling its other products – it has over 20 different ones – to existing users. Over half of its customer base uses at least 5 of its products. And this customer base comprises 271 of the Fortune 500.
For 2022 (its fiscal year ends Jan 31), CRWD posted a nearly 50% increase in annual recurring revenue (the stable portion of its revenue) to $2.56 billion, showing strong growth fundamentals. CRWD believes this recurring revenue number can hit $5 billion by 2026. It also generated $209 million in free cash flow.
Make no mistake however, this is a growth play. The company remains unprofitable due to stock-based compensation. Its healthy free cash flows are reinvested into growth.
Currently, CRWD is trading at 13.5x sales – near the lowest end of its valuation since it went public. Now may be a good time to strike at CrowdStrike.
To your wealth,
Felix @ Ace of Investing