CrowdStrike Holdings, Inc. (NASDAQ:CRWD) Has Some Way to Go Before It Becomes a Cash Cow
This article originally appeared on Simply Wall St News
CrowdStrike Holdings, Inc. ( NASDAQ:CRWD ) has arguably become a market leader in the last year. The stock price has risen 338% in the last 18 months, taking the company's market value to $59 billion. Most notably, the stock price is already up 53% since the tech sector correction in March and April. CrowdStrike's performance over the last three months stands out because the market has generally favored profitable companies, and CrowdStrike has yet to breakeven.
This may place the stock at risk if revenue growth slows. On the other hand, if the company is on the verge of breaking even, there's more chance that the stock will be able to maintain its leadership position.
This is particularly relevant for two reasons:
There are some questions about just how big the company's total addressable market is, and how long it can keep growing at the current rate.
In June, SentinelOne, Inc. (NYSE:S) held its IPO. SentinelOne is a cybersecurity company with a similar approach to CrowdStrike. This highlights the growing competition amongst the new generation of cybersecurity companies.
How far is CrowdStrike from Breakeven?
CrowdStrike Holdings, Inc. provides cloud-delivered solutions for endpoint and cloud workload protection in the United States, Australia, Germany, India, Israel, Romania, and the United Kingdom.
The company's loss has recently broadened since it announced a US$93m loss in the full financial year, compared to the latest trailing-twelve-month loss of US$158m, moving it further away from breakeven.
View our latest analysis for CrowdStrike Holdings
CrowdStrike is set to turn positive at the beginning of 2024 if we average the estimates of the analysts covering the stock. In the interim the company is expected to lose between $92 and $182 million each year. This isn't concerning for a company already earning nearly a billion in annual revenue, and with cash holdings of $1.6 billion.
However, investors should keep an eye on the revenue growth rate required to reach profitability by 2024. The 2024 breakeven point is based on growth of about 35% each year. This is a lot lower than the 77% growth rate achieved over the last 12 months, but growth has slowed quite dramatically over the last three years. If the company is forced to increase spending to reach those growth estimates it would also push profitability further into the future.
NasdaqGS:CRWD Earnings Per Share Growth July 23rd 2021
Underlying developments driving CrowdStrike Holdings' growth isn't the focus of this broad overview, however, bear in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
CrowdStrike's expected losses over the next two years should be well covered by its cash holdings, and the company can easily issue new shares to raise more cash. But investors will want to see the company maintaining a route to profitability given how competitive the cybersecurity industry is becoming.
As it stands there is no reason for concern, but investors should keep an eye out for falling growth estimates or rising costs, both of which may put the stock price at risk.
Next Steps:
There are key fundamentals of CrowdStrike Holdings which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at CrowdStrike Holdings, take a look at CrowdStrike Holdings' company page on Simply Wall St . We've also put together a list of relevant factors you should look at:
Valuation: What is CrowdStrike Holdings worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether CrowdStrike Holdings is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business - take a look at who sits on CrowdStrike Holding's board and the CEO's background .
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here .
Simply Wall St analyst Richard Bowman and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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