AI Is Driving an Increased Need for Cybersecurity. Here's the Best Way to Invest.
Key Points
CrowdStrike is a cybersecurity leader and continues to grow at a rapid pace.
However, the company isn't all that profitable, and the stock is expensive now.
- 10 stocks we like better than CrowdStrike ›
Artificial intelligence (AI) is creating all sorts of new opportunities, some good and some bad. While the majority of the world is focused on how generative AI can boost productivity and solve problems, a small cohort uses it for harm, and the boost that it provides bad actors and cybercriminals cannot be understated. As a result, cybersecurity is as important as ever.
There are countless ways to invest in cybersecurity, but I think the best way to invest is through one of the industry's undisputed leaders: CrowdStrike (NASDAQ: CRWD). CrowdStrike makes for a great investment now, and can help investors capitalize on the rising need for improved cybersecurity thanks to AI advances.
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Image source: Getty Images.
CrowdStrike is built for this era
CrowdStrike itself is an AI-powered platform. The primary offering from CrowdStrike is endpoint protection, which protects network access points (like a laptop or cellphone) from being used by a bad actor. It uses AI to detect normal operating activities versus abnormal ones, then shuts out the device if usage doesn't match historical patterns. CrowdStrike has been recognized by several firms as the best option in this offering, but that's not all it does.
The company has several add-ons that its clients can purchase for additional protection in various areas, and over half of its customers use at least six different modules. That shows that CrowdStrike can upsell its clients once they are on the platform, giving them a nearly all-in-one platform to manage all of their cybersecurity needs.
CrowdStrike is a consistent grower, and its annual recurring revenue (ARR) grew by 25% during its most recent quarter. However, CrowdStrike isn't all that profitable, and only posted $5 million of net income in that same quarter. This may be one of the biggest sticking points investors have, as CrowdStrike has teetered at the break-even mark for several years.
CRWD Profit Margin (Quarterly) data by YCharts
The market is also well aware that cybersecurity software is a very important part of any business in the age of AI, and any stock in the space holds a bit of a premium to other software stocks. As a result, CrowdStrike's stock isn't the cheapest.
CRWD PS Ratio data by YCharts
A P/S ratio of 41 is very expensive, and the stock has gotten pricey since the start of the year. CrowdStrike is by far the best cybersecurity company to invest in, but the price tag may be too rich for some. As a result, investors may want to keep this one on their radar, as there may be a better time to scoop up shares. However, investors shouldn't forget about it, as it's one of the best companies in this industry by far.
Should you buy stock in CrowdStrike right now?
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Keithen Drury has positions in CrowdStrike. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.
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