Crowdstrike rise 10 % after Q3 reporting

Crowdstrike a key holding traded up 10 % after report

Global Security Fund thematic exposure to cyber security is based on a structural and long-term growth trend in digitalization and rebuilding cyber resiliance and total defence.

CrowdStrike Holding has proven to be a strong performer in the challenging cybersecurity landscape. Despite macroeconomic challenges, the company has demonstrated impressive growth and financial health. In the third quarter of Fiscal Year 2024, CrowdStrike achieved a significant 35% year-over-year growth in total revenue, reaching $786.0 million. This growth is attributed to the demand for their AI-native Extended Detection and Response (XDR) platforms and effective business strategies. The company's Net New Annual Recurring Revenue (NNARR) grew by 13% year-over-year, surpassing 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 of 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 achievements, CrowdStrike faces ongoing challenges in the market. The management's focus for the upcoming year seems to be on scaling the market to create sustainable growth amidst 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 projected to increase by 35.6% this fiscal year to $3.0 billion and by 28.5% the following year to $3.9 billion. The EBIT margin has also seen significant growth. However, the company's reliance on stock-based compensation (SBC), accounting for 21.6% of its revenue, is a point of concern.

CrowdStrike's stock trades at a significant premium compared to the S&P 500, with high valuation metrics across different financial parameters. Given the company’s strong growth and profitability there is a reason for the premium and we expect valuation to come down and give ability for further strong share price performance.

The fund has continued to have a positive view of the company and its position.