Article today on Barrons written by Eric Savitz which discusses upgrade of CRWD from Hold to Buy by Brad Reback of Stifel w/ a price target of $300…
I normally don’t pay too much attention to the upgrades/downgrades – just another data point. But when they explain the reasoning (as often reported by Barrons), it can be informative to see what the analysts are looking at.
3 main reasons stated for the upgrade:
- Results of a recent proprietary survey of CRWD customers – ““The feedback speaks to the growing customer demand for not only consolidating security functionalities with CrowdStrike over time but also extending their CrowdStrike deployments” into new markets,” he writes in a research note.”
- “Reback also sees “significant runway remaining” to gain new customers. He thinks the company over time can boost its customer count to more than 100,000, or nearly 10 times the 11,420 customers reported in the company’s January quarter.”
- he also thinks expanded use of CrowdStrike’s Falcon endpoint protection program should allow the company to reach the higher end of its non-GAAP subscription gross-margin target range of 77% to 82% “more quickly than investors currently expect.”
Reback went on to explain that he believes CRWD is a “rapidly emerging disruptor” in the “workload protection” portion of the security-software market, which he thinks will continue to disrupt incumbent providers, while pushing into adjacent market sectors.
Current customer adoption rates are pretty good, with YoY growth rates in the 70% range. If they keep up the ~70% rate it will take about 4.25 years to get to the 100K customer level. That, combined with increasing GMs, will help drive increased profitability (if it comes true). High growth, improving margins, and increasing profits usually mean significant stock price growth.
All the best,
- long CRWD and happily staying that way