Is it safe to buy shares of cybersecurity company CrowdStrike Holdings (NASDAQ:CRWD) stock? CRWD stock has been on a bit of a rollercoaster this year. After opening trading in early January near $200 a share, the price fell to a low of $158.89 on Jan. 25 before rebounding to near $190 on Feb. 15 and then falling again to its current price near $178.
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In all, the stock is down 13% year-to-date and has declined 44% since hitting a 52-week high of just under $300 a share in November of last year.
While the pull back has been aggressive over the past few months, it inevitably raises the question of whether people should now buy the dip in CrowdStrike’s stock or avoid this one high-flying security that seems to have fallen out of favor with investors.
Based in Austin, Texas, CrowdStrike is a full service cybersecurity provider. The company’s “Falcon” system monitors prevents trillions of online attacks each week for companies large and small. And demand for its services has never been greater.
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According to Fortune Business Insights, the global cybersecurity market is forecast to grow to $366.10 billion by 2028 from $165.78 billion in 2021, for a compound annual growth rate (CAGR) of 12%. And, according to the Identity Theft Resource Center, the number of reported data breaches around the world jumped 68% last year to the highest total on record.
Clearly, cybersecurity is a thriving business, especially with the Internet of Things (IoT), machine learning, cloud computing, and artificial intelligence increasingly integrated.
There were several high profile cyberattacks in the U.S. last year, including on a major oil pipeline that serves America’s east coast. It is for this reason that the number of CrowdStrike’s corporate customers has swelled from 450 five years ago to more than 14,500 today.
It’s also why the company boasts a 100% renewal rate for its subscriptions. Currently, CrowdStrike offers 19 modules that are all subscription-based and service businesses of all sizes — small, medium and large.
Cash On Hand
CrowdStrike is in hyper growth mode and is not yet profitable. This fact has led the stock to get pulled down with other growth technology names as investors rotate into shares of more stable companies that are profitable. However, CrowdStrike’s financials remain impressive.
The company’s year-over-year revenue growth in last year’s third quarter was 63%. The company has increased its revenue in every quarter since it went public in 2019. And CrowdStrike’s gross margin in last year’s third quarter was an impressive 73%. Plus, CrowdStrike is cash flow positive. At the end of Q3, the company had $1.9 billion in cash and cash equivalents on its books.
CrowdStrike has a great reputation and tremendous customer loyalty. A survey carried out last year by Gartner, a technology research and consulting firm, found that 98% of CrowdStrike’s customers would recommend the company, the highest percentage of any company included in the poll.
Plus, CrowdStrike has emphasized its commitment to creating leading edge technology and constantly upgrading and improving its suite of products. Best of all for investors, CRWD stock has gotten cheaper over the past few months as its share price has come down. Today, CrowdStrike’s stock trades at almost 30 times trailing sales. Not cheap, but 23% lower than its peak last November.
The Bottom Line
The current selloff in high-growth tech stocks may not yet be over. More pain might lie ahead. But eventually, we will hit bottom and stocks such as CrowdStrike will recover.
And given the huge market for cybersecurity and CrowdStrike’s leading position within the industry, there’s every reason to believe that the company’s stock will be a long-term winner.
Investors willing to be patient should buy CrowdStrike shares in small increments on any further weakness. Build a position slowly as the share price comes down, be patient, and reap the future rewards of a rebound. CRWD stock is a buy.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
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