CrowdStrike Holdings Inc. (NASDAQ: CRWD), the company's first-quarter results and the price action they inspired echo a theme sounded by ID security firm Okta Inc. (NASDAQ: OKTA) and cloud services firm Salesforce Inc. (NYSE: CRM). That theme is one of outperformance and increased guidance that sparked — not a rally in the share prices — but a correction.
Besides tech and cloud, AI is the unifying factor in these names. They all use AI and are leaders in their space, so the price surge inspired by NVIDIA Co. (NASDAQ: NVDA) is to blame. The market ran up on an expectation AI would underpin results, and the market was right. The price has become less speculative, and savvy investors are buying the dip amid news about the CrowdStrike stock forecast.
CrowdStrike: Record Results Outpace the Consensus Figures
CrowdStrike had a solid quarter with results not only setting records up and down the report but also outpaced the consensus figures, and strength should continue. The company reported $692.6 million in revenue for a 42% year-over-year (YoY) gain to beat by 240 basis points. Increased penetration of existing customers and large orders drove gains, evidenced by the adoption rates.
The company says adoption rates for clients running five or more modules topped 60% and ran in high-double-digit ranges for six or more modules. The company's annual recurring revenue is also up 42% and helped to drive record margins.
CrowdStrike's margins set records at the gross and operating levels on a GAAP and adjusted basis. The GAAP margin came in at 78%, the adjusted at 80%, and the strength carried through to the bottom line. The GAAP results are break-even ($0) and up from last year's 14-cent loss, while the adjusted 57 cents also reversed a loss in the prior year and beat the consensus by 1,400 basis points.
The guidance is favorable and leaves room for outperformance later in the year. The second quarter and financial year guidance for adjusted EPS is a range with the consensus at or below the low end. This is cautious, given the first-quarter strength and the company's new IL5-compliant status.
The IL5 rating allows government agencies to utilize the company's services and should drive sales in the coming quarters. Additionally, a new deal with Pax8 will provide CrowdStrike services to Pax8's clientele.
The Analysts Confirm: The Bottom is in for CrowdStrike
The analysts like what they see in CrowdStrike's first-quarter results and have begun to raise their price targets. MarketBeat.com tracks seven new updates following the release, and six include a price target increase. The one outlier is a price target reduction but to a level above the current consensus. The takeaway is that the consensus figure is firming after a year of downtrending and is positioned to lead the market higher. The $175 consensus figure implies about 10% of upside for the stock, and many of the new and recent targets are above $180.
CrowdStrike fell after the first-quarter report, but the dip is getting bought. The market has price action up more than 10% off the low and showing significant support at the short-term moving average. This move confirms a reversal brewing since the first of the year and sets the market up for a new uptrend. Assuming the market follows through on this signal, CrowdStrike shares should begin consolidating at the current levels before drifting higher over the summer and into the end of the year. The critical level is $160. If the market can't get above there, it risks becoming range-bound.
