Is there any upside left in CrowdStrike’s share price?

CrowdStrike’s [CRWD] share price performance since its IPO in June 2019 has been impressive, rising 119.91% over the last year to $136.39 at last Friday’s close — and a whopping 326.88% since its 52-week low at $31.95 in mid-March.

The cybersecurity firm’s market capitalisation now stands at $29.93bn — a steep increase on its $11m valuation following its first day of trading, during which CrowdStrike’s share price jumped 71%.

With such stratospheric gains in a short period, though, has CrowdStrike’s share price come too far, too quickly, or is there more upside to come?

Why should investors care about CrowdStrike’s share price?

Pandemic fuels a fast-growing sector

The demand for protection in a cloud-based environment is growing rapidly, with millions of employees logging on to corporate networks from home as a result of the coronavirus pandemic. This shift has increased the need for more dynamic security measures.

CrowdStrike claims it has an advantage over some of its peers because, with all its data in one place, it is able to analyse the data in real-time, learning and reusing it from a single central location. In its Q2 update on 2 September, co-founder and CEO George Kurtz said that businesses adapting to Covid-19 restrictions have been “a tailwind” for CrowdStrike’s share price and wider business.

CrowdStrike seals move for Preempt Security

Last week CrowdStrike confirmed it had reached a deal to acquire Preempt Security for circa $96m. It aims to add Preempt's zero-trust security and conditional access technology to its Falcon platform, to help in real-time access control and threat prevention. Kurtz believes the acquisition is a key element in its growth strategy and will enhance its potential capabilities:

"Hybrid work environments will become the norm for many organisations which means that Zero Trust security with an identity-centric approach and detecting threats in real-time are critical for business continuity. With the addition of Preempt Security’s capabilities, the CrowdStrike Falcon platform will provide enhanced protection against identity-based attacks and insider threats," Kurtz said.

CrowdStrike’s share price fell 2.9% to close at $138.60 on the day of the announcement, but of course, this should be weighed against its meteoric rise.

“Hybrid work environments will become the norm for many organisations which means that Zero Trust security with an identity-centric approach and detecting threats in real-time are critical for business continuity. With the addition of Preempt Security’s capabilities, the CrowdStrike Falcon platform will provide enhanced protection against identity-based attacks and insider threats” - co-founder and CEO George Kurtz

Is CrowdStrike’s share price undervalued?

According to Seeking Alpha’s Michael Wiggins De Oliveira, CrowdStrike “is eyeing up profitability on the bottom line ahead of schedule, despite investing aggressively. The company continues to grow at a rapid pace and is expected to exit Q4 2021 with more than 50% top-line growth and positive non-GAAP (which exclude one-off transactions) operating income.”

Emphasising this positive outlook, CrowdStrike raised its full-year guidance in its Q2 results from $761.2m–$772.6m to $809.1m–$826.7m.

CrowdStrike’s second-quarter loss of $29.9m, or 14 cents a share, compares favourably with a loss of $51.9m, or $0.40 a share, for the same period last year. Adjusted earnings were $0.03 a share, compared with a loss of $0.18 a share a year earlier, while revenue rose to $199m from $108.1m.

What are the analysts saying about CrowdStrike’s share price?

Of the 21 analysts tracking CrowdStrike’s share price on Yahoo Finance, 4 rate the stock a Strong Buy, while 12 rate it a Buy. An average 12-month price target of $150.52, would see a 9.61% upside if hit (as of 30 September’s close).

The analysts’ positive outlook on CrowdStrike reinforces the strides made both across the cybersecurity sector and in terms of CrowdStrike’s share price acceleration since the March low — and the average price target would take the share price within a whisker of its all-time high of $153.10.

CrowdStrike share price vitals, Yahoo Finance, 1 October 2020