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Crowdstrike a key holding traded up 10 % after report
Profitable growth company with strong market position is exactly what investors are looking for today. Our theme sector and the leading companies within it have good prospects for high growth going forward.
CrowdStrike Holding has proven to be a strong player in the challenging cyber security landscape. Despite macroeconomic challenges, the company has demonstrated impressive growth and financial stability. In Q3 2024, CrowdStrike achieved significant annual growth of 35 % in total revenue, reaching $786.0 million. This growth is attributed to demand for their AI-native Extended Detection and Response (XDR) platforms and their business offering and strategy. The company's Net New Annual Recurring Revenue (NNARR) increased by 13 % compared to the previous year, beating expectations.
Despite some challenges and the absence of austerity measures, CrowdStrike maintained its guidance for the full year's free cash flow. This indicates confidence in the company's financial stability and management's optimistic outlook and forecast ahead. CrowdStrike's profitability has reached new heights, and its success in the cloud security business is remarkable. The company has successfully replaced other vendors in the cloud security ecosystem, as demonstrated by a 45 % annual increase in customers protected in the cloud. This is in line with the fund's view on consolidation in the sector and that the companies with the broadest and best offer are the ones that will have the prerequisites for continued high growth.
Despite these successes, CrowdStrike faces continued challenges in the market. Management's focus for the coming year appears to be on scaling up the market to create sustainable growth despite these challenges. Their strategy includes a balanced approach to growth and profitability, with a continued commitment to innovation and operational excellence.
Financially, CrowdStrike has shown a compound annual growth rate (CAGR) of 67.0 % over the past three fiscal years. Revenue is expected to increase by 35.6 % this fiscal year to $3.0 billion and by 28.5 % next year to $3.9 billion. The EBIT margin has also seen significant growth. However, the company's reliance on share-based compensation (SBC), which accounts for 21.6 % of its revenue, is a point of concern.
CrowdStrike's stock trades at a significant premium to the S&P 500, with high valuation parameters across various financial parameters. Given the company's strong growth and profitability, there is reason for the premium, and we expect the valuation to decline, allowing for further strong share price performance.
The fund has continued to have a positive view of the company and its position.