Crowdstrike Competitor: Sentinel One

Investment Analysis Clubs Saul’s Investing Discussions
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Fools,

Lately I have a nagging bad feeling about the CrowdStrike narrative.

Before I start I want to say - I’m defensive by nature, always liked to play goalie in sports and tend to overrate the dangers of life. So please take this with that in mind.

I notice that…

I am seeing Sentinel One mentioned more often in articles on cyber security/CRWD.

CEO George Kurtz is well aware of them, the two companies are trading barbs - and CrowdStrike even has a page dedicated to detailing why they are the superior offering…

https://go.crowdstrike.com/crowdstrike-vs-sentinelone-try-fa…

I’m sorry I don’t have too much time to document all I’d like here but I had read an article where the Sentinel One COO or CFO claim they were winning more business from CrowdStrike lately.

Sentinel One’s CEO is Israeli and forgive the absurdly generalist take but these guys are warriors and it seems he’s rallied top guys from Cylance - who was once CrowdStrike’s toughest competitor, as the company was formed by Kurtz’s ex-best friend.

Cylance was acquired by Blackberry and from what I can tell - essentially became irrelevant right after that.

A big part of the overall narrative from Kurtz has been that the competitive landscape is laughable. I think part of that was the death of Cylance. But essentially Cylance has been re-born with better leadership and a strong product. All the sites I could find give Sentinel One’s product rave reviews. The company plans to IPO shortly. And will merit serious consideration as the tailwinds for security are downright hurricanish. (It’s a word now).

Also, on Sentinel One, as our board’s resident cool-factor guy - the name is badass.

My concern is that CrowdStrike is the largest position I have ever had and I know it’s a huge position for many of you as well. Should they come out with strong earnings but note in the call that their outlook is tempered by more intense competition the stock could get shellacked. It’s about 28% off it’s ATH and to be honest, I’d have liked to see our top dogg hold up better than others during this unconscionable stretch of wet towel snaps we’re receiving on our collective heinies.

Bottom line - I’m not saying that CrowdStrike is facing any sort of existential threat and let’s face it, for our companies to excel they must ward off tough competition. Zoom has their work cut out for them vs. Microsoft and Google among others, and one can argue that it’s GOOD for our companies to be pushed to excel. The cybersecurity industry is hyper-competitive and uber macho so Sentinel One riling Kurtz et al can actually be a strong positive. But if it’s a little harder for CrowdStrike to Pac Man up every company in sight I figured that’s worth watching.

Thanks in advance for any input on this - and again note, I’m not throwing FUD, don’t mean to create drama, I’m not selling, but am considering trimming a bit. Would love your thoughts especially from any techies who may have strong reasons to be believe CRWD has the superior offering, or feel Sentinel One is old news and that my concerns are overblown, if not downright flatulent.

Best,

Broadway Dan

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Hey Dan, Crowdstrike is my largest holding as well, so thank you :pray: and damn you a little too :joy:. It’s always good to pay attention, but even more so with concentrated portfolios.

After reading your post, I spent some time scouring product reviews and articles trying to assess the competitive landscape. Unfortunately, I’m also not a techie. Most of what I read were just positive user reviews for both companies on sites like Gartner and the many other IT review sites. I couldn’t find any real head to head comparisons, just “why I like this product.”

The only place I could find head to head comparisons were on their websites. And, of course, those are essentially useless as they’re both just saying theirs is better than the other. A techie might find them useful (?), but, I kind of doubt it. It’s true Crowdstrike has a page dedicated to SentinelOne, but, it’s one of five company comparisons. They also do the same for VMware Carbon Black, Cylance, McAfee and Symantec. So, they haven’t suddenly singled out Sentinel One. Not sure if that changes your narrative at all? Also, that page isn’t first and foremost on their website menu when you visit the home page. You have to search for it. https://www.crowdstrike.com/

On the other hand Sentinelone has just one company comparison - Crowdstrike, and they feature it within their first menu item. https://www.sentinelone.com/ So, they have their sites set on the leader in the field.

What does this tell me? Sure, Crowdstrike has competition. And we should definitely continue to pay attention. But, even with SentinelOne (and others) gunning for CRWD, Crowdstrike has been blowing the doors off earnings and gaining a massive customer base. I certainly hope that’s the narrative continuing on March 16th.

I’m with Dan though, if any Techie’s would like to weigh in :blush:.

Best,

Brian

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I would say “Follow the Numbers!”

Last quarter Crowdstrike’s revenue was up 86%! That’s 86%!!! And the growth rate accelerated from 84% the quarter before. And subscription revenue was up 87%, and makes up 92% of revenue.

And subscription gross margin is 78%, up from 76% a year ago, and 71% two years ago, so they are certainly not having to cut prices.

And their operating cash flow was $88 million, and their trailing twelve month op cash flow was about $307 million, close as I can figure it, up from $48 million for the preceding twelve months.

And their operating cash flow was actually 38% of revenue!!!

And free cash flow was $76 million, up from $7 million the year before quarter. And TTM free cash flow was $246 million, up from a LOSS of $38 million for the preceding TTM!!! Read that again. And free cash flow was a full third of revenue (33%).

And they grew total customers by 84.5%, from 4561 a year ago to 8416, and by almost 1200 customers sequentially (1186 actually), in the quarter. That was up from the 969 new customers that they signed in the previous quarter, so they added 22.4% customers in ONE quarter.

Do you see any signs of competition cramping their style?

Best,

Saul

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Thank you, Saul.

I really appreciate your consistency and conviction that the NUMBERS, actual performance, reality, is what matters.

I’m trying to guess what could affect the numbers in the future. And it seems to me - and maybe this is farcically obvious, that the Saulinian method deals with reality, not speculation, not guesses, not Wayne Gretzky’s famous line “skate to the where the puck is going” but a pure commitment to what actually is. And should we see increased competition reflected in the numbers, we can deal with it then.

In short, there’s always things that could happen, the sky always could be falling, etc. But that’s now how we invest here.

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Just wanted to add here that the competition in the end point security field is massive and always has been, so new competitors are not an issue. There will be room for many new players, the origin of the actual company makes a difference, of course the tech makes a difference too and in that regards Crowdstrike is killing the incumbent players McAfee and the likes. It’s also US based company so that itself is important for the security community, government and US enterprise, it does has also major influence on other enterprises.

But as Saul has pointed numbers speak volume.

Also if anyone is following the news the constant security issues are causing more tail wind for Crowdstrike, Cloudflare and Okta

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For what it’s worth, I bought into crowdstrike because of the inherent network effects of the model and how the customers benefit tremendously with each new addition. Even if sentinel one has the superior product (which may be - I’ll never know) they can’t reproduce the network.

Midnight
(Long CRWD ~5%)

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For what it’s worth, I bought into crowdstrike because of the inherent network effects of the model and how the customers benefit tremendously with each new addition. Even if sentinel one has the superior product (which may be - I’ll never know) they can’t reproduce the network.

Maybe, Maybe not. This race is not over. Microsoft has a bigger network than Crowdstrike and could buy Sentinel One. The best thing to do is just watch your investment and the competition.

Andy

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CRWD is great company, I long it too. for other concerns, I thought it may depend on how big the market is, how many potential customers are there for CRWD and its peers, when the market will be saturated? dowe have that information?

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“Maybe, Maybe not. This race is not over. Microsoft has a bigger network than Crowdstrike and could buy Sentinel One. The best thing to do is just watch your investment and the competition.”

Agree 100%. I have been a cybersecurity practitioner for 15+ years and what you say is very valid. Microsoft by far has the most diverse telemetry across device, data, cloud, and identity vs. any other company combined probably all of them in the infosec realm. Crowdstrike has been a great stock but they are not significantly differentiated vs. Microsoft Defender, Carbon Black, Cylance, Endgame, Mcafee and the others.

Pros:

  • CEO has a lot of industry cred
  • Product works and is fairly simple to deploy/use
  • Their managed service offering has done well
  • Cybersecurity is in a boom phase and probably is sustainable though budgets growth won’t be sustained.

Cons:

  • Microsoft is the 1000 lb elephant and throwing their weight around
  • Name other cybersecurity companies with the kind of market cap crowdstrike has on much larger revenue?
  • There is no potential game changer theme like Cloudflare has with edge computing. They are simply an endpoint security tool with ambition to play bigger in infosec space.
  • They used super aggressive offers to get customers in place pre ipo. I question their ability to move price in their benefit.
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hi Saul and all,

This will be my first post in this board and i really wasnt expecting a question rather than something more informative. But i have to ask as its been nagging at the back of my head.

Here goes.

Crowdstrike (CRWD) have had a good run last year and its earning guidance for the 12 month forward is nothing short of amazing. My largest concern however would be its B2B business model. CRWD provides services to large corporate and I agree that that provides stable revenue/ ARR in the long run. BUT its addressable market is limited to just B2B. What about B2C?

Most mega cap companies (apple, amazon, microsoft) became so large because they are able to address both B2B and B2C business model. Would earning growth tapper off even earlier than we expect? What’s your thought? Am I missing something here?

Jo,
Long CRWD

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