Risk/Reward Rating: Negative

Crowdstrike (Nasdaq: CRWD) reported strong fiscal Q2 2022 earnings after the market closed on August 31, 2021. The shares responded by selling off over 4% the following day as the results were not enough to reignite upward momentum. Revenue grew an impressive 70% over last year’s Q2 and the top end of the company’s revenue guidance for the full year was raised to $1.409 billion which would register 61% growth over fiscal 2021.

Company Overview

Crowdstrike has become a leader in the IT security market in recent times. In fact, on the Q2 conference call, the CEO, George Kurtz, described the company as being in the “pole position” as the only cloud native, zero trust security provider offering protection across all three primary threat vectors: workloads, endpoints, and identity management. Furthermore, the company emphasized its competitive positioning in threat detection and breach prevention, rather than just malware prevention, as its key differentiator. This rings true in an age of massively distributed computing in which half of all security incidents involve the breaching of IT systems rather than the insertion of malware.

Financial Performance and Valuation

Given the muted stock reaction to the excellent financial results and competitive positioning, the market is signaling that the current valuation of Crowdstrike has priced in much of the good news.

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