Crowdstrike stock price analysis: Is CRWD a buy as it nears ATH?

CrowdStrike (NASDAQ: CRWD) stock price has been in a remarkable rally as investors circle back to artificial intelligence (AI) and cybersecurity companies. The shares jumped to a high of $290.25 on Friday as it neared its all-time high of $298. They have jumped in the past nine straight months, breaking its last record of 6 in 2020.

CrowdStrike is one of the biggest SAAS companies in the world with a market cap of over $68 billion. It has been named a leader in Gartner’s Magic Quadrant for Endpoint Protection. In this category, the company is ahead of other firms like Microsoft, SentinelOne, Palo Alto Networks, and Trend Micro. 

CrowdStrike offers its services to some of the biggest companies in the world like Cushman & Wakefield, Target, and Henkel, among others. Its primary product is known as Falcon, which is a software suite that analyzes and stops threats in the cloud. It uses advanced technologies like AI to do that. Falcon for enterprise starts at $499.95 while Enterprise goes for $924.95 per year. 

Its package for small businesses starts at $4.99 per device per month while the other one, Falcon Pro goes for $8.33 per month. These solutions are used by thousands of companies around the world now that cybersecurity is a growing industry.

CrowdStrike stock price has surged hard, helped by the company’s robust growth in the past few years. In the most recent financial results, the company said that its Annual Recurring Revenue (ARR) crossed the key target of $3 billion earlier than expected. It had a record net ARR of $233 million.

Its total revenue jumped by 35% in the quarter to $786 million. By segment, its subscription revenue rose by 34% to $733 million while professional services jumped by 57% to $52.6 million. Its net income rose to $199 million. It also raised its full-year revenue guidance to between $3.04 billion and $3.05 billion, a 36% growth rate.

A key concern among investors is that the company is priced for perfection. With a market cap of $68 billion and estimated FY’24 revenue of $3.05 billion, it means that it has a P/S ratio of 22.30, which is a huge premium. Microsoft, the biggest SAAS company in the world has a P/S ratio of 10. 

Its net income is expected to be $717 million, meaning that its P/E ratio is estimated to be 94, which is quite huge. Microsoft and other SAAS companies like Salesforce have a P/E ratio of less than 40. This is a sign that CrowdStrike is overvalued and priced for perfection.

Being overvalued is not entiry a bad thing. People who looked at perenially overvalued companies like Nvidia, Tesla, and Shopify have lost a huge opportunity as their stocks surged. In CrowdStrike’s case, the company needs to justify this valuation by having strong revenue and profitability growth.

The company can achieve this because of the rising demand for cybersecurity solutions internationally. Most analysts expect that most companies will boost their cyber investments in the co,ing years to avoid liability.

CRWD chart by TradingView

Turning to the daily chart, we see that the CRWD share price has been in a strong uptrend in the past few months. Notably, the lower side of the chart shows that the PS ratio has more than doubled from 10.69 in January last year to 24.52. Most recently the stock has moved above the key resistance at $262.25, the highest point on December 18th. 

The CrowdStrike share price has remained above the 50-day and 100-day Exponential Moving Averages (EMA). At the same time, the Relative Strength Index (RSI) has moved above the overbought point. Therefore, the outlook for the shares is bullish, with the next point to watch being at $300.

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