Why This Cybersecurity Stock Belongs in Every Millionaire-in-the-Making Portfolio
Key Points
CrowdStrike is positioned to grow faster than its industry's expected nearly 14% annual growth rate.
The cybersecurity specialist ended its latest quarter with over $5.8 billion in annual recurring revenue.
Trading at nearly 43 times projected sales, the stock is more expensive than most cybersecurity rivals.
- 10 stocks we like better than CrowdStrike ›
The world continues to become more digitally connected, increasing the need for cybersecurity. At this point, it's a mandatory expense for any business operating online or handling sensitive data. As its importance grows, so does the value of many big-name cybersecurity companies.
If you're looking for a cybersecurity stock that can be a core piece in a high-flying portfolio, look no further than CrowdStrike (NASDAQ: CRWD). The stock is up 117% this year as of Sept. 28, but there's still plenty of runway left for long-term investors.
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Image source: The Motley Fool.
The leader in a fast-growing industry
Artificial intelligence (AI) mania has taken over the past few years, but CrowdStrike is one of the pioneers of using AI to detect and fight cyberattacks. It's routinely regarded as the premier option in the market, and part of that is its data advantage. Since 2011, CrowdStrike has collected trillions of relevant data points, helping fine-tune its models and produce top-of-the-line products.
If you're picking a cybersecurity stock, going with one that's positioning itself as a leader in the growing industry is a smart choice. The global cybersecurity market is expected to grow from $248.3 billion in 2026 to $699.4 billion by 2034, according to Fortune Business Insight. That's a 13.8% compound annual growth rate (CAGR), but I expect CrowdStrike to grow even faster.
CrowdStrike continues to put up impressive growth
In CrowdStrike's latest quarter (ended July 31), revenue grew by 26% year over year to $1.47 billion. More encouraging is the $333 million in new net-annual recurring revenue (ARR) it added. ARR is a good indicator of CrowdStrike's business standing because it's predictable and reflects its subscription business model. Its ARR was $5.84 billion at quarter-end, up 25%.
It's one thing to grow revenue; it's another thing to do so while increasing profit and expanding margins. CrowdStrike is doing both. Margins on subscription profits, operating income, and free cash flow all expanded last quarter.
CRWD Revenue (Quarterly YoY Growth) data by YCharts.
CrowdStrike doesn't come cheap
The main knock on CrowdStrike's stock is that it's expensive. At the time of writing, it's trading at nearly 43 times its projected revenue over the next 12 months. That's by far the highest among its main competitors.
CRWD PS Ratio (Forward) data by YCharts.
A high valuation isn't inherently bad, but it could limit the stock's short-term upside and increase the chance of a pullback. CrowdStrike's stock has historically been volatile, but if you stay the course, it's almost certain to reward you over time.
That said, I wouldn't recommend investing a lump sum in CrowdStrike; decide how much you can invest and break it down into intervals. This can help protect you from some short-term volatility.
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Stefon Walters has positions in CrowdStrike. The Motley Fool has positions in and recommends CrowdStrike and Zscaler. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.
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