A Smart Investment Opportunity for the New Year: CrowdStrike

As the new year approaches, it's a great opportunity to explore new investment options. One promising stock to consider is CrowdStrike (CRWD), a leading cybersecurity company that utilizes artificial intelligence (AI) to enhance its services.

CrowdStrike has developed a comprehensive cybersecurity platform designed to safeguard businesses at every level. Their system automates processes such as threat hunting and incident response, significantly improving efficiency.

In July 2023, CrowdStrike faced a major setback when a faulty software update led to widespread issues, affecting millions of devices globally. This incident caused the company's stock to drop sharply by 44%. However, the recovery has been swift, as the aftereffects of the incident turned out to be less severe than anticipated.

Recently, CrowdStrike raised its revenue forecast for the current fiscal year, signaling potential growth opportunities for 2025 and beyond. With that in mind, let’s explore why investing in CrowdStrike may be a wise choice as part of a New Year's resolution.

Comprehensive Cybersecurity Solution

The cybersecurity sector is often fragmented, with companies relying on multiple vendors for different services. CrowdStrike's Falcon platform stands out as a robust and all-inclusive solution, featuring 28 modules that address various aspects of security, including cloud protection, identity security, and endpoint defense.

Despite the significant disruption from the July incident—which caused an estimated $5 billion in losses for key clients—CrowdStrike's value proposition remains compelling. The platform offers substantial convenience and cost savings, ensuring its continued attractiveness in the market.

In the third quarter of the fiscal 2025 year, 66% of CrowdStrike's customers were utilizing at least five modules from the Falcon platform. This growth was particularly notable among organizations with fewer than 2,500 employees, marking a record quarter for CrowdStrike.

The recent introduction of the Falcon Flex product in 2023 has played an important role in this growth. Falcon Flex allows businesses to subscribe flexibly, enabling them to adjust their spending on various Falcon modules based on current needs. This flexibility encourages customers to explore and adopt more of CrowdStrike’s offerings over time.

CrowdStrike's AI capabilities are integral to its operations, as their models analyze over two trillion security events daily, which continuously improves the accuracy of their threat prevention measures.

CrowdStrike's Revenue Outlook

In its latest earnings report, CrowdStrike achieved a remarkable $1 billion in revenue for the third quarter—a 29% increase compared to the same period last year. This milestone highlights the company's strong performance and resilience in the market.

Following the July incident, CrowdStrike had initially lowered its full-year revenue forecast to a maximum of $3.9 billion. However, with its recent earnings announcement, the guidance was raised back to $3.93 billion, indicating a recovery from the earlier troubles.

Although the company anticipates lower free cash flow in the fourth quarter due to the costs associated with the incident, it maintains its long-term goal of reaching $10 billion in annual recurring revenue (ARR) by fiscal 2031, which would represent a 150% increase from its current ARR of $4 billion.

Why Now Is a Good Time to Buy

Currently, CrowdStrike's stock is trading only 11% below its all-time high. While its price-to-sales (P/S) ratio of 23.1 may seem elevated compared to its main competitor, Palo Alto Networks (PANW), the company’s impressive 29% revenue growth in the last quarter justifies the premium.

Looking ahead, if CrowdStrike successfully achieves its aggressive ARR target, this could lead to a significantly lower forward P/S ratio of just 8.7, indicating substantial growth potential. Furthermore, CrowdStrike's management estimates its total market opportunity at $116 billion, which is expected to grow to $250 billion in the coming years. This immense market presents a wealth of opportunities for future growth.

For those seeking to diversify their investment portfolio as the new year approaches, CrowdStrike is a solid candidate. However, the biggest rewards are likely to be realized by investors who hold onto their shares well beyond 2025.

Investment, Cybersecurity, Growth