Start the conversation
Leave a Reply
You must be logged in to post a comment.
The last year has changed the way we work, the way we communicate with each other, how we educate our kids and train adults, and more in countless different ways.
It's also created profitable opportunities left and right. Think of the incredible runup of Zoom Video Communications Inc. (NASDAQ: ZM) amid the pandemic. It's up nearly 400% since the start of the last year.
But those innovations aren't going away. The pandemic has accelerated change. And that's why CrowdStrike stock could be the next major breakout.
You see, with more reliance on technology, the world is going to need even more digital security...
CrowdStrike Is Becoming an Essential Tech Stock
Business has begun moving to the cloud, and the trend to use the cloud over traditional computing is continuing to accelerate.
This change has created a massive need for cybersecurity to keep all the data we create and send flying around the web safe from cybercriminals.
We have seen millions of names and personal information stolen from Facebook recently. When one of the biggest tech companies with hundreds, if not thousands, of brilliant computer programmers and scientists in its employ can't keep its data safe, how can other businesses have any hope of doing so?
Computer crime is becoming a huge business. Why rob someone with a gun when you can sit on a tropical island that doesn't have an extradition treaty with the United States and steal to your heart's content?
There are dozens of companies working to help businesses and individuals protect their data, but CrowdStrike Holdings Inc. (NASDAQ: CRWD) stands out above the rest because it's solving one of the biggest problems in cybersecurity.
As soon as a cybersecurity system guards against one type of attack, the crooks come up with another way to attack. That requires another software patch once the best defense strategy is figured out. That usually means someone is getting hacked before a patch is made, plus your company would typically need to manually install it.
That's unless you use the Falcon cybersecurity platform from CrowdStrike. CrowdStrike's platform is cloud-based and uses artificial intelligence to track new threats.
The Falcon platform focuses on protecting the endpoints of the cloud. These are all the devices that may access the network, including laptops, tablets, smartphones, and employee's home desktop systems.
As we shifted to work from home last year, the number of people accessing networks skyrocketed, raising the potential cybersecurity threat exponentially.
CrowdStrike's platform continuously collects data points from all devices attached to the network and assesses potential threats. It uses machine learning, a form of artificial intelligence, to analyze the data. The brilliant thing about CrowdStrikes approach is that every new device attached to the platform makes the software smarter and better at protecting the network as a whole.
Why CrowdStrike Stock Is a Conviction Buy
Cybersecurity has become an enormous business, with total revenue growing from about $40 billion in 2016 to what is expected to be about $200 billion by the end of the year.
CrowdStrike sells its cybersecurity service as a subscription, so most of its revenue is annual recurring revenue. Even better, once it lands a customer, it keeps them. CrowdStrike has retention rates of 98% for its subscription services.
CrowdStrike's customers seem to love the endpoint protection focus of CrowdStrike's software. Since 2017, subscription sales have risen by 82% annually.
Even more impressively, once CrowdStrike lands a customer, it tends to do an excellent job of upselling them. Every dollar of initial sales has a renewal value of about $1.25.
Using artificial intelligence to fight cybercrime represents a huge step forward in cybersecurity and cloud computing. CrowdStrike should grow rapidly for a long time as more businesses move their data to the cloud.
Because of the high growth rates and colossal potential market, CrowdStrike's shares are not cheap on traditional valuation methods.
We don't think that matters. Amazon.com Inc. (NASDAQ: AMZN) has never looked cheap on traditional metrics either. If you put $1,000 into Amazon 20 years ago, you would have over $200,000 today. If you had added another $1,000 each time the stock fell more than 50% from the highs, you would have more than $500,000 in your account today.
CrowdStrike has the same potential to make patient investors who can handle volatility rich.
Right now, CrowdStrike is a growth stock in the sweet spot of the cycle. Sales and earnings are growing at a very high rate. Margins are expanding. Customers are staying and buying more software from the company.
Because the market for its software is growing at a high rate, the sweet spot for CrowdStrike will probably last a very long time.
Long-term ownership of growth powerhouses like Amazon and CrowdStrike is what builds fortunes. You can buy some here and plan on adding to your position whenever we see a lousy market develop.
Election Results Mean Nothing for 2021 Markets
When it comes to the 2021 stock market, politics won't matter, and neither will the COVID-19 pandemic.
Major economic shifts are about to hit the country. They've been brewing for 10 years, and there's no stopping them now.
Some stocks are destined to soar... while others are doomed to crumble.
Market veteran Shah Gilani is revealing what he feels will be the winners and losers in this 2021 Investors Address.
And it might just be the most valuable 60 minutes of the year.