Crowdstrike's make-believe target.

Crowdstrikes’s make-believe target. Should I say “fake target”.

They have ARR for 2021 of $1.731.

In their Investor Meeting yesterday they guided/targeted for ARR in 2026 of $5.000.

That’s a target that’s SO LOW they can’t possibly mean it. What they did was throw out a number that sounds impressive, and that they hoped would awe anyone who didn’t know how to use a pocket calculator

Okay, 50% growth per year for five years is $13.14 billion, so they are shooting WAY under 50% per year.

Well, 40% growth per year for five years is $9.31 billion, so they are shooting WAY under 40% per year, as well.

Maybe they are planning for 30% growth per year for the next five years? But that is $6.43 billion, so they are targeting for even less growth than 30% per year.

It turns out that 24% growth for five years will bring them in at $5.07 billion, so they are targeting just under 24% CAGR growth. That’s just 24% annual growth !!!

Will they beat that? Of course they will. It just bothers me when a company takes me for an idiot. Or maybe they used a 24% guide so that investors and analysts would be happy if they only came in at, let’s say, 29% per year growth! (“Wow! They beat their target!”)

That $5 billion target was definitely not impressive.

Saul

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Saul, keep in mind that Crowdstrike just finished fiscal 2022, as year-end is end of January.

5B $ ARR is a 4-year target and translates to roughly 30% CAGR.

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Also why is it when one company is guiding low they are just sandbagging but when another company guides low they are calling us idiots?

Andy

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Also why is it when one company is guiding low they are just sandbagging but when another company guides low they are calling us idiots?

Well Andy, I think of sandbagging as when a company almost apologetically presents a number which is obviously low, and much lower than they expect, and which causes concern but which they will beat.

However, in the oral and slide presentations Crowdstrike presented this new $5 billion ARR target as a huge upgrade, as an almost miraculous wonderful goal, that we should stand back and admire and wonder how they will ever get there. They were saying that this goal was something wonderful! To me the optics were very different than sandbagging.

However, to me they were saying, “We see ourselves as really slowing down. We are setting a goal to a CAGR of 30%, but we probably hope to come in at 35% to 45%.” (Note: this is not 35% to 45% this year. This year will be lower than last, but higher than the next year, which will be higher than the year after that, which… etc. but they are hoping for an AVERAGE of the four years at 35% to 45%, which means the fourth and maybe the third year will be considerably below that four year CAGR.)

They also kept talking about, and showing graphs of, their 5 year CAGR’s being at 105% or 95% for various metrics that are now in the 60’s, but they go back five years so they can impress a casual investor by including the big numbers from five years ago. I also was unhappy with this, feeling that they were misleading people who didn’t know better. I mean, who cares what their growth rates were five years ago. That’s ancient history, and it has no influence on what their growth rates will be this year or next.

Best,

Saul

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They also kept talking about, and showing graphs of, their 5 year CAGR’s being at 105% or 95% for various metrics that are now in the 60’s, but they go back five years so they can impress a casual investor by including the big numbers from five years ago. I also was unhappy with this, feeling that they were misleading people who didn’t know better. I mean, who cares what their growth rates were five years ago. That’s ancient history, and it has no influence on what their growth rates will be this year or next.

Wow Saul, I am amazed how your mind works. You are really clear in your analysis of companies. Thank you for clearing that up for me.

Andy

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This argument of fake targets or low balling, I’m not sure what the point really is. Especially if you don’t own the stock, or plan to own the stock.

Yes, forget history, let’s look at performance now. Out of all the cloud names, YTD CRWD is the onky stock I can find that’s up on the year. Every other one I own or look at seems to be down between 20 and 40% YTD. So whatever management is doing that could possibly be viewed as suspect, they seem to be winning the game YTD.

Glad to own CRWD, like the CEO for his brashness, amd right now Wall St. seems to be agreeing with their approach.

TMB

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Out of all the cloud names, YTD CRWD is the onky stock I can find that’s up on the year. Every other one I own or look at seems to be down between 20 and 40% YTD.

Could that be because they didn’t participate in the run-up in 2021 so they didn’t fall back.

CRWD - Jan 1, 2021 price was $216, now its $218, up roughly 1% in a year and 3 months, in spite of the bump it got on Friday from its investor conference and IL-4 approval

BILL - Jan 1, 2021 price was $121, now its $200, up roughly 65% in a year and 3 months

NET - Jan 1, 2021 price was $77, now its $110, up roughly 43% in a year and 3 months

DDOG - Jan 1, 2021 price was $103, now its $134, up roughly 30% in a year and 3 months

ZS - Jan 1, 2021 price was $200, now its $227, up roughly 14% in a year and 3 months

S and MNDY didn’t IPO until midyear 2021.

SNOW is the only one down from Jan 2021, down 31% from $272 to $208.

In fact, looking at 2021 alone, Crowdstrike managed to be down 3% in a year when

Bill was up 93% (I wasn’t in it back then),
Cloudflare was up 71%
Zscaler was up 61%
Datadog was up 81%
etc

so, not having been a winner for the previous 12 months, it’s not much of a surprise that it didn’t sell off the last three months like the winners did.

My guess anyway.

Saul

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[CRWD] not having been a [stock price development] winner for the previous 12 months, it’s not much of a surprise that it didn’t sell off the last three months like the winners did.

This pure price argument made me think as it contradicts what I would see as a general rule: “Let’s rather ignore price and valuation as long as hypergrowth is intact”.

Why now this pure price argument when Crowdstrike still manages to be a +60% grower (Ignoring that 30% target and instead focusing on their YoY 66% revenue growth and actual Q3+Q4 results, after coming down for several quarters having stabilised for now)?

The answer I THINK to have found: Because that general rule has to be suspended when a company exceeds a certain size.

Saul’s pure price argument doesn’t say WHY Crowdstrike was not a winner in 2021. That seems to be clear, perfectly explained by Muji:

folks are not exiting for execution failures, but due to the sheer size of the company shifting from hypergrowth to profitable growth.

Apparently that is the thinking of the market as a whole in 2021, either not realizing or ignoring as Monkey explained that such growth rates at their from quarter to quarter much larger size are even more impressive than the higher ones from before at a far smaller scale, that “… the results were outstanding because of the scale!”.

So absolutely outstanding business results apparently are not interesting for the market but only pure hypergrowth numbers - which naturally at some point have to come down - even when the business results then are much better than before!

So my very simple thinking (too simple?): Whether a SaaS company is simply outstanding and “the best” does not matter any more when it becomes too big. Should this be indeed the view of the market it might spell potential trouble for the two other biggies, DDOG and SNOW?

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Saul

Have no idea. Why I said YTD numbers, so for me anyway, as someone that got back into CRWD earlier this year, it’s been a much better performer. We could go back 3 years and also make a list, but my only point was what these names have been doing more recently. When someone posted some good news on CRWD the other day, you added to the thread and seemed to attempt to mute the good news and even the move after hours.

It might not have been the most exciting news, but I see news on stocks you hold presented and never questioned. Sorry, sometimes I just don’t see consistency here in regards to companies owned and not owned.

TMB

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Take it or leave it, and certainly the point will not always be correct in all circumstances, and Saul can correct me if wrong, but I think his point is that (1) any stock can look good if you take a particular shorter term time range to demonstrate its prowess (here, CRWD has outperformed during the crash of the last 2 to 3 months or so), but (2) over the longer term, through the cyclical crashes, and even after the crash, the stocks with the better fundamentals (with SNOW being the exception that did not meet the rule (but then again SNOW is also a recent IPO that is still adjusting) that the stock with the better fundamentals are still much higher during the year 2021, and even now after the latest crash, than is CRWD.

Moving forward things may change of course. I thought CRWD’s earnings call was quite positive. I am not sure why they so low balled their 2026 goals, unless they really think things will really slow (and one can look at Palo Alto and see that 30% growth is sufficient to create large returns with Palo Alto (with a smaller multiple), but CRWD is projecting less than this with their 2026 goal. I am not really sure how to read into this 2026 projection other than it does project some vastly slowing revenue growth.

This all said, I have noticed this myself, through thick and thin, booms and crashes (and Saul has reiterated this point himself in the past) that even after the crash, the best hyper-growth, category dominant stocks, end up higher than they were a year ago or so, even at the bottom of annual crashes that come about. Sometimes more than just an annual crash. At this point CRWD has underperformed on those less subjective and selective time frames.

This is not a 100% rule, as most rules outside of physics and the hard sciences are not, but it is a good enough rule to enable confident systematic investing (unless of course the world materially changes on us - which it presently is, but I doubt such changes will be permanent, although this time it may be longer than we are use to).

As such, I don’t consider CRWD at this point to be a bad investment target at all. I think their earnings report was good. I just think the above is what Saul’s point was, and that point is sound and has been proven over and over again. People come here, tell us it is the end of the world with certainty and with a distasteful disdain for us and arrogance, and shockingly, even at the bottom of the end of the world were still up over (and usually materially) even at subsequent bottoms.

This time around we are probably in for a much bigger storm (probably, certainly as it has already hit and it is still hitting us). When the storm ends will Saul’s point be accurate again out the other side? Probably, yes.

Tinker

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Using YTD as a starting point may be arbitrary; but so is using 1 Jan 2021.

2021 happened to be the year when CRWD was lapping some very strong 2020 numbers (more so than DDOG or NET). Why don’t you compare the price performance since CRWD’s IPO in mid-2019? CRWD’s performance since then was on par with DDOG and ZS.

CRWD’s recent numbers are very strong and, like it or not, investors are rewarding them for it. It is the best performing hypergrowth saas stock this year by a wide margin. No other stock comes close.

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Many people on this board sold out of CRWD and bought S right around the start of this year. Since then, CRWD is up +6.6%, S is down -32.6%. In other words, an investment in CRWD since then would have yielded 58% more vs. S. This could explain the animosity towards CRWD displayed by some people here.

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Saul stated clearly that it [CRWD] doesn’t have a place in his concentrated portfolio. Fair enough. Saul’s ability to unemotionally pivot and get in and out of positions that don’t meet his growth threshold any longer is something that I’ve been told is to be admired.

But I’m not sure why CRWD is an ongoing target for being torn down. It sounds petty. If you have something substantive to post about why you’re getting back IN or if someone who has held through the debate on the board has NEW INFORMATION such that they’re getting out, I’d love to hear it and digest it.

I still don’t think anyone goes wrong owning a basket of ZS/CRWD/S as a secular, long term play. I know that not getting scared off of CRWD when everyone one was jumping off the bandwagon a while back there has kept my long-term cap gain status intact. I look forward to holding my ZS/CRWD/S positions for years to come.

As you all were…

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Tinker,

“I am not sure why they so low balled their 2026 goals, unless they really think things will really slow (and one can look at Palo Alto and see that 30% growth is sufficient to create large returns with Palo Alto (with a smaller multiple), but CRWD is projecting less than this with their 2026 goal. I am not really sure how to read into this 2026 projection other than it does project some vastly slowing revenue growth.”

CRWD is projecting exactly 30% annualized growth in their $5B ARR goal (which they will of course beat by a large margin). As others have pointed out, they have a January fiscal year end. So FY2026 is really calendar year 2025.

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Saul, they have guided to 30%+ CAGR for the next 4 fours as FY26 is 4 years away not 5 (as FY ends 31 Jan) so your growth calcs are a bit off.
Similar to SNOW investor presentation some time back, the guide is usual sandbagging and will probably CAGR to 40%+ for CRWD which is impressive for a company generating 30%+ FCF Margins.

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Let’s put Crowdstrike in a little bit of context:

  1. In the face of a looming recession, companies have indicated that cybersecurity will be the last place to cut; in fact, cybersecurity spending is increasing;

  2. Hypergrowth companies have been rerated this year, with an increasing focus on what the company is generating now, not in the distant future. Crowdstrike is free cash flow positive (30% margin), unlike Sentinel One;

  3. Russian cybersecurity giant Kaspersky will be bleeding customers, who will need protection somewhere;

  4. Crowdstrike just got Level 4 Authorization from the US government. As a reminder, the US government issued an executive order that demanded governmental agencies modernize their cybersecurity solutions;

  5. As this thread illustrates, 5B ARR seems like a low estimate, allowing for far more than the 10% appreciation than the spreadsheet number-crunchers seem to think (of course, this is at the mercy of capricious stock market multiple fluctuations).

Let’s not forget that Crowdstrike is maturing, but still a 55 - 60% grower in an environment that seems challenging, but perhaps less so than for BILL, MNDY, etc.

My humble two cents!

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I’ve read every post in this thread and I just don’t understand why everyone, but Saul, is saying that Crowdstrike is ‘Guiding’ to $5B. In the CFO section of the presentation he said, This is not a Guide. i just like to keep things as simple as possible and so am using 10% as the multiplier to show how ‘easily’ Crowstrike can get to $5B. Then again in the Q and A Managegement corrected an analyst question about the ‘guide’ reiterating that that wasn’t a ‘guide’.

Saul’s point of Crowstrike trying to make $5B sound amazing is as silly as he says it is and I don’t think Crowdstrike manage,ent was trying to make $5B sound ‘amazing’ in the least. I believe they were showing just how ridiculously easily their going to get there.

Why isn’t anyone talking about the new Forrester report, March 2022, showing Crowstrike moving up in the rankings and completely dominating the Leader Position In EDR protection and Sentinel One dropping backward relatively to their prior position?

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Thanks WillO!

Since you didn’t post a link to the Forrester report, here it is:

https://reprints2.forrester.com/#/assets/2/482/RES176332/rep…

Yes, CRWD is as high and to the right as you can get! Definitely in the pole position in the endpoint detection and response rankings. Crowdstrike notched a 4.54/4.80/5.00 on their scorecard (“0”=weak, “5”=strong) for Current Offering/Strategy/Market presence. The only other one that’s close is Microsoft. SentinelOne’s scores for the same metrics were 3.70/3.30/2.50

Here’s what they had to say about CRWD:

CrowdStrike dominates in EDR while building its future in XDR and Zero Trust. CrowdStrike continues to demonstrate excellence in its EDR offering through a context-rich UI infused with high-quality, in-depth threat intelligence. Its strategy stays true to its DNA as an endpoint-first security tool while methodically expanding into XDR and embracing Zero Trust. Its roadmap follows this trend, continuing to prioritize feature enhancements in EDR, prevention capabilities, and an expansion to additional XDR capabilities around identity, data, and third-party ingestion. Reference customers spoke incredibly highly of the support they received through the technical account management program. The offering has characteristically strong coverage for Windows and coverage for the most popular versions of Mac and distributions of Linux. It provides detailed threat intelligence within the investigation as well as more in-depth, threat group-specific reports. All telemetry is mapped to MITRE ATT&CK. The offering has a native sandboxing feature, remote shell capabilities, custom scripting, and a built-in automation feature to generate playbooks. Threat hunters can search by type or through raw data, and search results are also contextualized with threat intelligence. Hunters can create real-time detection rules and scheduled queries based on a hunt. However, the offering provides seven days of data retention by default, less than many in this evaluation, and as such customer references suggest exporting telemetry to another source for longer retention needs. CrowdStrike is best suited for those that want a powerful EDR tool with a plethora of high-quality threat intelligence seamlessly integrated into the offering. It is also a good fit for security teams looking to outsource some capabilities through managed services.

Long CRWD… battling for top position in my portfolio (currently first) with DDOG and UPST depending on how the stock of each is doing on any particular day.

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I’ve read every post in this thread and I just don’t understand why everyone, but Saul, is saying that Crowdstrike is ‘Guiding’ to $5B. In the CFO section of the presentation he said, This is not a Guide. i just like to keep things as simple as possible and so am using 10% as the multiplier to show how ‘easily’ Crowstrike can get to $5B.

Will, does it matter? When the previous posters say that the “guide”/“target”/“projection” is low-ball and will be exceeded, they are making the same point as what you are saying: that CRWD can easily do more than $5B in 2025. It’s the substance that matters, not the semantics.

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catsunited:

You’ve more than made your point. Give it a rest and move on.

After all, it is Saul’s board.

Chuck

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