Crowdstrike Q4 2024 Earnings

Investment Analysis Clubs Saul’s Investing Discussions
1

Hello? I’d like to report a murder.

The Crowdstrike call is still going on, but about halfway through CEO George Kurtz’s prepared remarks, I logged into my brokerage and sold out of my Palo Alto position.

I had (stupidly in retrospect) cut my CRWD position in half and started a position in PANW to spread my cybersecurity risk across the top companies, as I wasn’t sure which one would win. Tonight, Kurtz left PANW skewered on the floor. He deserves an Olympic fencing medal.

It was a blowout quarter, and major deals replacing PANW’s products were specifically called out. He also twisted the knife with the word “fatigue” several times–which is a word I’m sure PANW’s CEO wishes he could now take back from his own call.

CRWD’s stock price is up 25.35% as I write. Listen to the call. Fantastic. And just this one shift has eliminated the 3% down day for my portfolio. I still got a good return on my PANW, and I have no idea where I’ll put the money, but I feel like I know the sector winner now. It’s CrowdStrike.

76 Likes
2

as I learned from Ozzie Myers way back when, “money talks and bulls**t walks”

6 Likes
3

Here’s the breakdown of CrowdStrike’s quarter by Brad Freeman. If you don’t get his newsletter–it’s free and it’s very well done.

Here’s part of his ending take:

No other software company in the world combines its growth, product superiority, elite go-to-market, cross-selling engine, margin trends, market share gains and TAM. I’ll keep saying it; not a single one. That is why it’s so expensive… it’s special. One out of one in a crowd full of pretenders.

JR

22 Likes
4

To be balanced, Freeman goes on to say - “STILL… that does not mean that CRWD the stock can become endlessly more expensive without me ever trimming. I’ve decided to trim roughly 11% of my stake after this stellar quarter.”

16 Likes
5

This earnings report is precisely what I expected out of CrowdStrike. After an accidental historical analysis of my own investments (a long story) I discovered that my greatest mistake in investing was ever selling shares of CRWD.

However, don’t get too excited about that 25% price jump. CRWD dropped 5% the day of earnings with no company specific news and in February dropped 11% the day of PANW earnings as investors were clearly concerned about a sector-wide trend. If you take those two events into account, the bump in price puts CRWD into a more rational and historically typical price point for an earnings release.

22 Likes
6

A very very impressive display all round from Crowdstrike in terms of numbers. I still don’t like Kurtz’ trash talking - and it seems it was PANW’s turn to get it in the neck, having previously gone after Microsoft, ZS and SentinelOne.

Frankly I see Crowdstrike treading a fine line on this one going after Palo Alto and “platformisation”.

Effectively there are are 2 choices in cyber security - best of breed point solutions and comprehensive platform plays. Best of breed point solutions would include ZS and SentinelOne (as well as CyberArk and Okta etc) and comprehensive platform plays are the Palo Alto’s (as well as Microsoft and Fortinet).

Crowdstrike is somewhere in between but seems to be moving from best of breed to comprehensive.

Historically given the risks and nature of cyber security threats, customers have been usually prepared to buy belts and braces and take no risks so it remains to be seen whether Palo Alto or Crowdstrike can persuade customers to go for the comprehensive platform play.

I had halved my position between 270 and 330 but have kept a 5% stake. I am still in ZS (5%) and SentinelOne (2%) as well as Datadog (10%) and Cloudflare (5%). Of the above Datadog and SentineOne are next to trim based on growth performance vs valuation and conviction respectively.

Ant

31 Likes
7

I’m a little surprised at the enthusiasm, seems to me like maybe there’s a bit of a short squeeze involved? Since PANW and ZS reports dragged the rest of cyber down with them, and CRWD actually beat estimates (barely).

Again my take is the same as with NET - 30% growth is considered amazing now? ARR increase in Q4 was only 27%. CRWD is being valued at almost 100x forward earnings/cash flow, and 26x trailing sales, 22x forward sales. That level of sale multiple was last seen in mid 2022, on the way down to 11x sales at the beginning of 2023. And it’s not like they’re improving operating leverage, revenue is guided to grow 29% next year at the midpoint and non GAAP EPS is guided to grow… 25%.

Maybe they beat their 2025 numbers a couple percentage points, but unless you’re banking on continued multiple expansion (always possible, PS ran all the way up into the 60s in 2021, those were good times, sigh), you’re looking at high 20s/low 30s in gain going forward. Any multiple compression will be fairly painful.

27 Likes
8

The only thing I am unhappy about was about the trim I did on CRWD before the earnings, on Monday. It’s still my top position, so I am happy.

7 Likes
9

Interesting to note that ZScaler also panned any talk of customer fatigue on their call. Seems like a PANW problem not a sector problem,

Vince

8 Likes
10

I had a 5% position that I sold last week. I don’t regret it. Stock is way too expensive for my taste. I see more upside in other names. Also, I learned from the 2021-2022 SaaS recession not to hold large positions in companies with unreasonable multiples. The trailing PS ratio was about 26 last week - really high in my opinion - for a company expected to grow around 31% last quarter (ended up 33%). If the PS is somewhere near the topline growth, I have a hard time calling it “reasonable.”

They had a great quarter all-around and are showing sustainable growth with incredible operating leverage.

Even so, looks like they are trading at about 63X 2024 FCF and around 122x FY2025 EV/FCF-SBC.

-Good luck to all holders.

14 Likes
11

Long CRWD - ~2%. One of my larger stock holdings.

Brian Stoffel had a good video on X yesterday discussing valuation. High level summary - expensive, but justifiable. How to value it? P/E - useless. P/FCF - also not great based on the stage the company is in. He says the best way is a reverse discounted cash flow model. He explains his assumptions and results in the video.

Another observation - many believe that CRWD will soon be added to the S&P 500 and that is why its valuation is being bid higher currently.

The best companies are usually priced at a premium.

13 Likes
12

For the majority here who got fried during the 14 months of hell (Oct/21-Dec-22), we are very scared of crazy high valuations. So much so that I trimmed my highest conviction going into earnings, something I wouldn’t have done 3 years ago.
And I still don’t know the balance I should seek. Reverse discounted cash-flow may be a good idea. From a FWD P/E perspective, everything is expensive. Even the >$1T companies. AMZN 42, NVDA 33, GOOG 20.

9 Likes
13

I watched Brian’s video, even in his DCF model, CRWD would have to grow cash flow at 25% a year for the next 10 years. It is totally possible, but it seems like a pretty high bar to me, considering where their growth rates are already at today.

Great companies are usually priced at a premium, but the SaaS recession reminded us that valuation matters - even though it is a great business model, SaaS is subject to major slowdowns along with extreme corrections.

13 Likes
14

rodatl and Jeff,

I 100% agree with caution on high valuation - if you look back through my history of posts, you will see that I am probably among the most conservative on this board. But I’m wondering if the pendulum has swung too far in the opposite direction based on the pain experienced. Believe me, I understand the pain - having personally felt it in 2000 and 2008. I am not saying CRWD is a “good” or “safe” investment at this valuation. It is stretched - just like NET. Everyone has to make their own decision on what level of risk they want to take.

For me, the valuation risk is mitigated by position sizing. Unpopular topic on this board.

15 Likes
15

@AnalogKid70

I totally agree with you. I like to hold 8-12 stocks so that is why CRWD is out for me. I don’t consider it a “fat pitch” or one of my top 10 or so ideas.

If I held 15-20 or more positions, I’d probably keep it as a small position, 2-3%. Cybersecurity threats are very likely to grow at a rapid pace over the next decade as AI use-cases increase and applications continue to proliferate so that might give CRWD a chance to live up to its expectations.

11 Likes
16

I am good with being ripped for sounding like the fool but here goes anyway, let’s recap. CRWD SAAS ARR increased 35%. Great, I would always be happy with that, but PANW’s SAAS ARR was up 50%. Hmmm. Oh but it must be a smaller base. Let’s see, CRWD 3.44B, PANW 3.49B. And truth be told it was less 6 months ago but PANW’s higher growth rate has catapulted them above CRWD.

Now, I am not saying CRWD is not a good company, but I don’t understand the idea that PANW was kicked down $100 when it reported the above numbers and CRWD went up $50 with lesser numbers. I get it, George was talking a good game and Nikesh Almost certainly regrets using the word fatigue, but what I thought I heard is that they are shifting strategies to try to get multiple product sales to each customer. The idea is to use the Freemium model to get people to try them out because the margins are better if they can pull in the multi-product customer over the single product ones. Kind of the platform logic that has worked well, with their long term focus to getting even faster revenue growth.

Sounds good to me, especially from a company that has been delivering growth for years. I don’t know maybe CRWD’s products are better, very well could be, but 50% growth on a very large base doesn’t sound like their products are worse or that they are losing share??

In any event, I own both and am happy with both. Certainly it will be interesting to see how this pans out. Rah rah speeches are cheap, the numbers are where the rubber hits the road.

Anyway, I will have more data when all the cyber security firms report. For now, I am congratulating CRWD stockholders (of which I am one) and scratching my head a little on the market reactions to PANW. Somehow it feels like the voting machine is winning over the weighing machine at the moment, but in the long run?…. As I said, hmmmmm.

Randy
Long CRWD And PANW, AND PANW Tickerguide.

40 Likes
17

PANW is down because of the forward looking numbers. They adjusted full year billings growth guide down to just 10% (vs. previous 15-18%) this is not good for Future revenue growth anyway you look at it and the stock it going to get punished until they show they can re-accelerate it.

Bnh

24 Likes
18

Randy,

I think the important thing to remember here is why $PANW is seeing SaaS ARR increase so fast. It’s because it is a “Legacy” cybersecurity firm. That means, for better and worse, it started before mass-adoption of the cloud and many of its clients are on-premise.

That allows for a very wide moat with HUGE switching costs.

The only exception: if customers need to think about whether or not they want a paradigm switch to the cloud (SaaS). And that’s not $PANW’s historical bread and butter. It’s SaaS ARR is growing because customers are switching, not because $PANW is winning big business. And the incentives $PANW is giving away make it seem like management is truly worried about losing business and customers have to cross this gap and decide who the provider will be.

That doesn’t mean $PANW can’t be a winning stock, nor does it mean $CRWD is destined to dominate. But it does mean that the 50% figure is much more mirage (even with the big base) than one might expect.

Brian
Long CRWD

44 Likes
19

REVENUE:
CRWD revenue beat the expectation by almost 1%. They told us 3 months ago there were going to deliver up to $840M in revenue. Well, they delivered $845.3M, a 7.5% QoQ growth and 33% YoY growth. That’s nice

ARR:
It now stands at $3435M ($3.44B). Net New ARR this Quarter was $282M, a 26% more than last Q of $223M. Nice acceleration to see in net new ARR

SBC:
I think it’s nothing to worry about. It’s at 21% of revenue, $176.3M in Stock based compensation. for the Full Year we ended with 631M in SBC

ADJUSTED OPERATING INCOME
At 25% margin, for the Full Year 660M, a 22% margin

CASH from OPERATIONS
Wow, nice, 347M, 41% of revenue

FREE CASH FLOW
33% of revenue, at 283M, very nice, similar to Q4 of last year.

CUSTOMERS
over 29K customers and 580 customers paying more than 1 million annually. Let’s get more customers guys !!! More international expansions and more Federal contracts.

I am quite excited that Crowdstrike is now selling 27 modules
Charlotte AI and Falcon for IT will become a great revenue source
New Customers are landing with almost 5 modules

They guided next Q to deliver up to 905.8M in revenue, a 7.2% QoQ growth
The prelim numbers for next Full Year 2025 is 31% growth, at 3989M. I hope to see 33% growth, about 4050M

So far Crowdstrike is doing great, I mean a platform with 27 modules, holy moly, all based on 1 agent. Outstanding. I hope to hear more of Falcon for IT and its growth trajectory

CRWD is 10% of our portfolio, I trimmed some at $346 but keeping the rest for next year.
The valuation is getting high, yes, that’s true, but I am too stupid to know when to sell and when to get back in so I’ll just keep the shares as CRWD is executing quite well for me. Let’s see next Q.

Good luck to all the longs ! Cheers !

Baconski

LINKS
https://ir.crowdstrike.com/static-files/eacdeb7f-2a27-4b88-8680-ca7fe13dc9cd

image
image1604×1042 134 KB

image
image1622×904 59.6 KB

29 Likes
20

Screenshot 2024-03-07 at 9.01.30 AM
Screenshot 2024-03-07 at 9.01.30 AM1438×818 98.2 KB

Here is is what fried us during the 14 months of hell, thank you to Jamin Bell at Clouded Judgement for this chart, his service is free and if you are not already following I recommend you do, if only to take a peek at valuations.

I’m not saying CRWD valuations are smart at this point, lots of people saying sell right now and I trimmed down to 5% (sadly, before earnings) but where we are now is NOTHING compared to where we were at the peak.

THAT should have been the warning to us and that should be the learning and now we each have to decide when too high is too high and where the balance is, keeping in mind that the best of the best stocks are almost never cheap.

For me, CRWD is about as high as I’d like to see it and I’m going to wait for a downdraft before I buy more, but it’s an acceptable hold.

48 Likes