Is CrowdStrike’s share price poised to benefit after its Q1 update?

CrowdStrike's [CRWD] share price has made impressive gains over the last year, rising 134.24% from under $100.00 to $222.15 at Friday 28 May's close (note US markets were closed on Monday 31 May for the Memorial Day public holiday).

CrowdStrike's share price has been more volatile in 2021, rising to a 52-week high of $251.28 on 16 February, before slipping to $168.76 on 30 March. Ahead of the cybersecurity company's Q1 results on Thursday 3 June, the shares have still eked out a gain of 5.81% so far in 2021.

CrowdStrike is also the third-largest holding (5.83%) in our tracked Cybersecurity theme, the First Trust Nasdaq Cybersecurity ETF [CIBR], which came bottom of the performance scanner last week with a drop of 0.46%. Looking over the previous month though, it features nearer the top of the leaderboard with a rise of 0.28%, with most themes having slipped back.

 

CrowdStrike delivers industry-first solution

CrowdStrike growth strategy continues to follow a potent mix of innovation alongside key acquisitions. Last month it unveiled the “industry’s first adversary-focused cloud security solution”, which combines threat intelligence with detection capabilities to not only deliver details about a cyber-attack, but also report on those behind it. As the Motley Fool’s Robert Izquierdo says, “it's the first industry solution to spotlight the attackers themselves.”

On the acquisition front, CrowdStrike completed a $392m deal for Humio in March, a leading provider of high-performance cloud log management and observability technology.

“Humio will enhance CrowdStrike’s ability to solve real-world customer problems with its cloud-native platform … with the acquisition of Humio, we are accelerating our XDR capabilities to cloud speed, re-defining the industry standard for modern XDR” - CrowdStrike co-founder and CEO, George Kurtz

 

CrowdStrike co-founder and CEO, George Kurtz (pictured), said: “Humio will enhance CrowdStrike’s ability to solve real-world customer problems with its cloud-native platform … with the acquisition of Humio, we are accelerating our XDR capabilities to cloud speed, re-defining the industry standard for modern XDR.”

CrowdStrike is certainly doing something right, after adding 1,480 new customer subscriptions in the last quarter (Q4 FY20), bringing the total subscriber numbers up from 5,400 to 9,896 at the end of January, an 82% year-on-year increase. CrowdStrike’s share price could be set for a boost should the firm reveal positive updates on its latest product innovation and the newly-formed integration of Humio, along with the latest new subscriber numbers.

 

CrowdStrike set to benefit from cybersecurity sector growth

It’s estimated that the global cybersecurity market will jump from $184.2bn in 2020 to $248.3bn by 2023, with cyber attacks set to increase in frequency and sophistication. The number of attacks reported to the FBI have more than tripled since the pandemic began in 2020, from about 1,000 per day to over 3,000, according to Izquierdo. It’s even led to the World Economic Forum listing cyber attacks as one of this year’s top global threats, alongside the coronavirus pandemic.

CrowdStrike appears to be well-positioned to benefit from the growing cyber threat, after its full-year revenue surged 82% from $481.4m to $874.4m. The company has also consistently grown international revenue since going public in 2019 – it grew 98% in the last fiscal year to $247m.

  

Over the last four quarters, CrowdStrike has beaten consensus earnings per share (EPS) estimates on each occasion. For the last reported quarter, CrowdStrike’s EPS came out at $0.13, ahead of the anticipated $0.09, an upside surprise of 44.44%. CrowdStrike’s share price could be in line for a boost should this outperformance pattern continue in Thursday’s first-quarter update.

 

What is Wall Street expecting?

CrowdStrike’s Q1 EPS is expected to climb from $0.02 a share in Q1 2020 to $0.06 according to Zacks, which would represent a year-on-year change of 200%. CNN are forecasting a slightly lower but still vastly improved EPS of $0.05. Revenue is set to increase 64.1% year-on-year, to $292.2m according to Zacks, while CNN estimate sales to come in marginally lower, at $291.5m. Both estimates are at the top end of the company’s March guidance, where revenue was anticipated to come in between $287.8m and $292.1m.

 

Where next for CrowdStrike’s share price?

CrowdStrike is yet to record a profit 10 years after its formation, reporting a net loss of $92.6m last year. However, this was down from the previous year's loss at $141.8m. Izquierdo is unconcerned, noting that “it's common for tech companies to operate at a loss for years as they work to prioritise growth.”

He adds: “Its balance sheet is strong. CrowdStrike exited FY 2021 with $1.9bn in cash and equivalents, a substantial step up from the prior year's $264.8m. Total assets came in at $2.7bn compared to total liabilities of $1.9bn.” Looking ahead, Zacks notes that CrowdStrike’s full-year 2022 revenue is projected to climb 51% to $1.3bn, with FY23 revenue set to jump another 33% to $1.76bn.

  

The cloud-based cybersecurity firm’s fundamentals certainly look strong, with the company on track to move into profit. Analysts covering the stock appear to agree, with 20 analysts polled by CNN placing a Buy recommendation on CrowdStrike’s share price, along with one Outperform, two Hold and one Underperform rating. There are currently no sell recommendations on the stock.

Of 23 analysts offering 12-month price forecasts, CrowdStrike’s share price has a median target of $250.00, with a high estimate of $280.00 and a low estimate of $210.00. The median estimate represents an 11.14% increase from Friday’s close at $222.15