CrowdStrike Stock: $ 5 Billion Revenue By 2025 (NASDAQ: CRWD)

CrowdStrike (NASDAQ: CRWD) is the exceptional tech stock that has not seen its valuation multiples destroyed amid wider weakness in the tech sector. The relative strength is understood when considering the investor’s appetite for cybersecurity stocks, as as well as the firm foundation of the company. Although the stock isn’t exactly cheap, the clear story and strong profit margins guarantee a bulk premium. I expect shareholders to be rewarded by owning CRWD in the long run, albeit at lower expected earnings than seen elsewhere in the technology sector.

CRWD Stock Price

CRWD initially crashed along with other tech stocks, but has since rallied hard from low, likely due to hopes for increased cybersecurity spending as a result of the Russia-Ukraine war.

Now trading at $ 235 per share, the stock is 21% lower than its all-time high but the valuation multiple remains very rich especially considering the valuation reset that has occurred across the technology sector. I last covered the stock in December when I called the stock a buy on the back of a strong secular growth story and high profit margins, offset by a premium multiple. Those characteristics still apply, and CRWD has already released long -term guidance that could help boost premium multiples. Although less valuation is given in terms of safety margin, this top-level cybersecurity operator offers one of the lower risk growth stories available in the market today.

What is CrowdStrike?

CRWD is a cybersecurity company focused on securing endpoints. Endpoints are like cell phones, computers, and other devices-CRWD allows its customers to determine which endpoints can securely access protected data.

Over the past few years, CRWD has quickly become the market leader in endpoint security.

That success is not surprising considering that CRWD appears to have the best product offering. This is evidenced by the high ranking of the Forrester company.

Aside from that high ranking, CRWD is now building brand name recognition. The company wins the business of the largest company, which should help win business from the smaller company in the future.

CrowdStrike Stock Financials

Unlike other tech stocks that saw a rapid growth slowdown in 2021, CRWD was able to raise earnings by 66% last year. Cybersecurity is not something that is just a trend during a pandemic.

CRWD achieved strong growth through two factors, the first being the rapid expansion of its customer base.

The second factor is through its high dollar -based retention rates, which have remained strong even as the company has weathered comparable pandemics.

Investors are likely big fans of the 30% free cash flow margin generated by the company.

I have noticed that because many of its customers pay their subscription earnings in advance, it has the effect of boosting free cash flow even if the incoming cash represents future earnings. Thus, investors may wish to focus on non-GAAP operating margins, which are still strong at 19% in 2021.

Expectedly, CRWD still has a long runway of growth, as market penetration remains very low especially among small companies.

Cybersecurity is a long -term secular growth story – every company will likely eventually have to purchase a cybersecurity product to protect themselves from cyber threats. With CRWD positioned as a clear leader in endpoint security, it has a clearly visible runway to continue to grow at rapid rates.

Is CRWD Stock a Buy, Sell, or Hold?

Regarding that runway, management made it clearer by providing guidance for at least $ 5 billion in revenue by 2025.

Many tech companies like ServiceNow (NOW) and Snowflake (SNOW) have provided this type of long -term guidance, which has typically helped stocks earn multiple premiums – CRWD makes no difference. Wall Street consensus estimates surprisingly expect CRWD not to perform that guideline, earning only $ 4.8 billion in revenue in 2025.

Let’s now talk about appreciation. CRWD guides for long -term targets of 22% operating margin and 30% free cash flow margin.

The company has already achieved a 30% free cash flow margin, though most is due to prepayment of deferred earnings. I assume the company will achieve 30% long -term net margin. I see the stock maintaining a 2x price to earnings growth ratio (‘PEG ratio’) due to the story of cybersecurity growth and the generation of positive cash flow. Assuming a 25% exit growth rate in 2025, the stock could trade at 15x sales in January 2026. That reflects a stock price of $ 312 per share or an increase of approximately 7% annualized. . If we instead assume 40% long -term net margin, the new target stock price will be 20x sales or $ 415 per share, which represents a potential 15% annualized increase. While the latter assumptions may seem aggressive, I wouldn’t be surprised if Wall Street maintains a similar view of the stock considering the high current margins. Given the valuation, the main risk here is if stock sentiment deteriorates and the stock experiences margin compression. In the current environment, I see the stock trading at a 1x PEG ratio, which will lead to the stock price of $ 156 per share in 2025, or a 34% downside over the next 4 years. That was a terrible comeback especially considering I was using targets 4 years ago. Another risk is if the company does not maintain its market leadership, which will lead not only to further multiple compression but also the potential inability to reach its growth targets. Based on where the stock price is trading right now, I rate the stock as a buy because of my prediction that management’s earnings guidance in 2025 will prove conservative and the stock should maintain a premium that much of it.

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