CrowdStrike Is Back in Buyers’ Territory

CrowdStrike Holdings Inc. (

CRWD, Financial) has hit a bit of a glitch lately, with the stock pulling back more than 10% over the past month. The stock has also faced systemic headwinds from the rising 10-year yield as anticipation for rising interest rates in 2022 is now very strong.

CrowdStrike’s dynamics are stronger than ever, so I think the recent pullback is only a reason for investors to buy more.

Recent earnings and growth

The Sunnyvale, California-based cybersecurity company posted revenue of $337.69 million (69.7% year over year) for its second quarter. Revenue was driven by subscription growth; Crowdstrike added 1,660 net new subscription customers during the quarter, which amounts to 81% year-over-year growth.

Furthermore, recurring revenue has hit an impressive $1.34 billion after investors questioned the sustainability of the north of a billion mark after it achieved that feat in 2020.

Cash build and acquisition potential

Operating cash flow and working capital have increased by 86.99% and 56.48%, respectively, over the past year.

A key to tech stock performance is accretive and innovative acquisitions. If CrowdStrike can manage to acquire assets, which will give it a competitive advantage, then investors will definitely witness surges in top-line growth. The cash build-up over the past year can certainly facilitate such acquisitions, adding to previous notable investments and acquisitions such as DoControl, Automax and, most recently, Cribl.

Key metrics

Shareholder value metrics are looking good. If we examine the free cash flow, CrowdStrike’s capital expenditure-sales ratio is 203.88% better off than the sector median, and its levered free cash flow margin exceeds its average by 501.16%.

If we do a quick valuation based on free cash flow and forward enterprise value/Ebitda, we arrive at a target price of $1,462 per share, which could be reached within the next five years.

Final word

CrowdStrike is an excellent pullback buy. The stock has hit a bit of a glitch due to systemic features, but it should be back on course soon and could exceed the $1,000 mark in the future.