Rethinking CrowdStrike’s Strong Momentum

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CrowdStrike Holdings Inc.’s stock has experienced impressive growth in 2023, surging approximately 90% year-to-date. The surge continues to capture attention, with one analyst expressing optimism about the company’s future prospects.

Adam Borg, taking over Stifel’s coverage of CrowdStrike shares on Monday, upgraded the stock from hold to buy. As a cybersecurity company operating within a crowded market for endpoint security, CrowdStrike stands out due to its unique qualities.

Borg highlights CrowdStrike’s differentiation as its cloud-based endpoint technology, characterized by high efficacy and a lightweight single-agent architecture. Moreover, the company’s ability to analyze over 1 trillion events daily demonstrates its remarkable scalability. Recognizing these strengths, Borg raised Stifel’s price target for the stock from $153 to $225.

Considering the cybersecurity landscape, Borg expects consolidation among platforms in the coming years. In this environment, he anticipates CrowdStrike will excel and reap the benefits. He believes that the softer economic backdrop, coupled with the ongoing shortage of cybersecurity professionals and a heightened focus on cost-effectiveness, will drive larger platform vendors to consolidate cybersecurity spending. Through this consolidation, these established vendors can leverage their position to offer bundled solutions at attractive prices, potentially undermining the point solutions market. CrowdStrike, as a best-of-breed player, is well-positioned to navigate and capitalize on this changing landscape.

Despite the stock’s significant appreciation this year, Borg still sees an attractive valuation. Currently trading at approximately 9.2 times enterprise value based on Borg’s estimates for calendar 2025 revenue, CrowdStrike’s stock is undervalued compared to its peers, who trade at 10 times enterprise value for the same metric. Similarly, the stock trades at a multiple of 28.8 times enterprise value to estimated 2025 free cash flow, whereas peers trade at 36 times.

Borg predicts that CrowdStrike will sustain revenue growth in the low-to-mid-20% range, at a minimum, while simultaneously improving its operating margin and free cash flow generation. These factors have the potential to drive multiple expansion, further bolstering the stock’s performance.

As of Monday’s morning trading, CrowdStrike’s stock had risen approximately 2%. With its strong momentum and promising outlook, the company continues to captivate investors and industry experts alike.

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