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Here’s What Savvy Investors Know About CrowdStrike (CRWD) Stock

Shareholder returns depend on how well a company performs in critical subjects.

True enough, cybercriminals always hunt to exploit firms’ weaknesses. Ransomware and data breaches come with enormous costs. Some costs included ransom payments, downtime, security, and data restoration. Meanwhile, others like deteriorated customer confidence and reputation hit might be challenging to measure.

Companies spend billions of dollars protecting endpoints and systems, and CrowdStrike (CRWD) trusts it will boast an addressable marketplace of more than $100 billion within the coming few years. However, what is the essence of a massive addressable market if a firm is not ready to capitalize on it? Let us check CrowdStrike’s primary pillars.

Customer Accumulation

First and foremost, CrowdStrike should accumulate customers. Investors have multiple choices in endpoint protection or cloud security, with the race comprising CrowdStrike, reputable players such as Palo Alto Networks (PANW), and contenders like SentinelOne (S).

Meanwhile, CrowdStrike delivers impressive results. For example, it has expanded its customer subscription base twelve-fold since 2018, hitting 16,323 as the 2022 financial year ended.

The company maintained the trend into the 2021 financial year’s initial quarter, with its subscription customer base touching 17,945. Clever investors know that’s a break-or-make zone.

Increase Adoption

The increased number of customers has seen the company boost its revenue. CrowdStrike’s Falcon modular allows clients to tailor solutions according to their needs. The company’s sales soar as it encourages customers to adopt more modules, stay on the platform, and increase their spending each year.

Over 70% of CrowdStrike’s clients used more than four modules as the previous quarter ended. Moreover, approximately 20% were using more than seven modules.

CrowdStrike has recorded DBNR (dollar-based net retention) rates beyond 120% each Q since 2019. DBNRs of beyond 100% show customers increasing spending each period, and 120% remains quite impressive.

The pudding proves that, with ARR (annual recurring revenue) rising at an attractive rate. ARR hit $1.9B during fiscal 2023’s Q1, with a $728M increase since 2022 Q1. That also reflects the Falcon platform performance. CrowdStrike pleases its clients with its customer retention rate of 98%.

Scale to Profits

The final move will be ensuring profits from growth, and wise investors know this could take years. S&M (Sales and Marketing) is highly costly at this phase. CrowdStrike spent $617M in this stage during financial 2022.

That’s a good investment as the company grows and monetize customer. Moreover, shareholders understand it’s crucial to spend on S&M and research & development during this period, even if that means forgoing returns.

Some clues show the company will likely attain profitability in the future. The subscription net margin stands well beyond 75%, and the firm breeds optimistic free cash flows, often a profitability precursor.

CrowdStrike seems to make attractive moves in attaining phenomenal growth. Moreover, growth stock has seen a brief rally recently following the 2022 slump. Nevertheless, lucrative CRWD accumulation opportunities might be yet to showcase due to the prevailing topsy-turvy marketplace.

Editorial credit: Piotr Swat / shutterstock.com

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