CrowdStrike's stock rocketed 87% higher at the IPO (June 12), jumping from its pre-IPO price of $34 to $64 per share when it opened to the public.
For months now, we've been saying CrowdStrike Holdings Inc. (NASDAQ: CRWD) would be an important IPO to watch, but that we couldn't recommend buying it at the IPO. Instead, we suggested waiting six months to a year, or even buying into cybersecurity ETFs to avoid potential losses.
And it looks like we were right.
You see, the only investors who got the 87% gain were institutional investors who got access to shares at the pre-IPO price. For investors like us, the stock is down nearly 9% to $58. That's what it's dropped since shares first traded on the exchange.
But now that CrowdStrike has gone public, is it worth a buy?
We'll tell you everything you need to know about the stock, plus when buying in at the IPO makes sense...
Is CrowdStrike Stock Worth Buying?
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Wall Street seems to love CrowdStrike stock, but that's because they've made money off of the company already. At your expense. After all, someone was paying $64 a share for the stock, and it wasn't the hedge funds that paid $34 a share.
But that doesn't mean the stock doesn't have potential for retail investors down the line.
Crowdstrike is famous for uncovering the Russian hacks on the Democratic National Committee during the 2016 presidential campaign.
But it's also built its entire business around providing cloud-based security. In fact, the firm tracks and stops 1 trillion security threats per week on a global scale. This has ultimately led to CrowdStrike working with the U.S. government through a FedRAMP Authorization.
That's a very big deal for cybersecurity firms, as it means it will continue to do business with the federal government for the foreseeable future.
That's helped CrowdStrike's market cap soar to $12 billion. That's four times its initial valuation of $3 billion and double the valuation it earned after its $700 million funding round at the IPO.
This also means it's now worth more than 37-year-old cybersecurity company Symantec Corp. (NASDAQ: SYMC), despite only making 5% as much revenue. But unlike Symantec, CrowdStrike has yet to turn a profit.
CrowdStrike is operating on negative equity. In 2017, CrowdStrike's year-end report only showed revenue of $92.5 million with a net loss of $135.5 million. By year-end 2018, its revenue more than doubled to $219.4 million - but its net loss increased to $140.1 million.
Regardless of hype and future potential, that's exactly why we can't recommend buying CrowdStrike stock right now, especially at these prices. We'd like to see CrowdStrike approach profitability before we jump in. It'll certainly be one to watch in the future - especially because cybersecurity is a pivotal part of the defense industry for tackling the growing $6 trillion in cybercrime damages from countries like Russia, China, and even North Korea.
And if we wanted to take a flyer on it now, we'd wait for shares to fall down to their initial price near $34 a share. That's where Wall Street valued it.
But that doesn't mean you should avoid every IPO.
Just look at Beyond Meat. Investors who read Bill Patalon's Private Briefing and bought in when we said to are now seeing gains of 210%.
If you're looking to get in early on the next hot company, make sure you stay tuned and subscribe to our "IPO Watch" Profit Alert.
And if you're looking for a way to cash in on the growing global security threat, then we've got you covered too...
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About the Author
Daniel Smoot is a Baltimore-based editor who helps everyday investors with stock recommendations and analysis. He regularly writes about initial public offerings, technology, and more. He earned a Bachelor's degree from Towson University.