Curious About CrowdStrike

Recently, my second-level thinking has drifted to CrowdStrike, a stock I have owned for several years. The generally held bull thesis, at least as I understand it, is a best-in-class cybersecurity product. Personally, my contrarian concerns center around that not being enough to sustain long term growth over a period of, say, ten years. As many of us here hold the company, my trepidatious mind wouldn’t ignore some rebuttal over the following generally held bull cases:

#1 – CrowdStrike offers a best-in-class product, they differ from the competition.

Well, what qualifies as best-in-class? Directly from their website:

• “Using world-class AI, the CrowdStrike Security Cloud creates actionable data, identifies shifts in adversarial tactics, and maps tradecraft in the patented Threat Graph to automatically prevent threats in real time.”

• “Purpose-built in the cloud with a single lightweight-agent architecture, CrowdStrike delivers hyper-accurate detections, automated protection and remediation, elite threat hunting and prioritized observability of vulnerabilities.”

• “The CrowdStrike Security Cloud correlates trillions of security events per day with indicators of attack, the industry’s leading threat intelligence and enterprise telemetry from across customer endpoints, workloads, identities, DevOps, IT assets and configurations.”

• “Sophisticated attacks require a mix of automation and human expertise in the form of elite threat hunting. CrowdStrike proactively searches for threats on our customers’ behalf. An elite team of threat hunters works 24/7 as an additional layer of protection to catch what other solutions miss.”

To me, those read more like an attention-grabbing press campaign and less like being able tie upcoming innovation directly to revenue/profits.

#2 – To quote their own press release, “CrowdStrike is trusted by over half the Fortune 500, and over two-thirds the Fortune 100.”

If you already service over half the Fortune 500, where is the meaningful growth going to come from? Many folks will point to the number of products/services they offer, with even “60% of active customers using 5 services”, but now the thesis for CrowdStrike seems directly tied to the sales team, not the products team.

#3 – Profitability is just around the corner.

Yes, according to a recent earnings call transcript, they “achieved GAAP profitability for the first time in the company’s history.” The CFO then goes on to note, “We are very proud, but have yet to reach sustaining profitability going forward. We believe reaching this milestone demonstrates that our financial model will deliver GAAP profitability in due time…but we have other things we’re going after right now.”

What are they going after? Grabbing customers and more sales, right? Well, again, that brings us back to point #2 above. It’s a sales business, not a product business.

Please note, my intention is not to trash CRWD owners. After all, I am one. We have a smart group here, and I’m curious if direct revenue/profit drivers exist beyond what I’ve shared above?



@brandonwahl Help us understand – or maybe it’s just me – what you’re looking for. Here are some different things I’m hearing from you but I’m not sure I’m getting it right:

  1. what gives us confidence CRWD will be able to sustain their competitive edge over a long period of time?
    My answer: Online security has been a very quickly evolving field since the first “worm” attack of 1988 (I remember being approached to join in some “hijinks” about 10 years before that, but I can’t tell you about that). No “moat” or lasting business advantage that I can think of has protected any vendor in this market for more than 5-10 years at the very most (unless you consider Microsoft’s ability to sell mediocre or ineffective products to low-information, low budget buyers :wink:).
    Consequently, this cannot be a “set it and forget it” type of investment. New types of threats constantly emerge; new competitors emerge; old competitors reinvigorate themselves in new ways. Consider the market shift to SaaS from intranet architectures: that stranded competitors that built their products around a “fortress” approach.

  2. How much potential growth lies ahead for the company? What should we make of their claims to work with > 50% of the F500 and over 2/3 of the F100?
    My answer: This is a huge market, and continues to grow because the threats continue to increase and the operating environment tends to become more complex, not simpler over time. From a sales perspective, trust and “social proof” are hugely important in this market. A truism is that there are two kinds of companies in the world today: those who know they have an online security problem to solve, and those who don’t know it yet. When those new buyers make purchase decisions, part of what they rely on are the choices made by other buyers, especially those seen as having more resources or knowledge to make better informed decisions. That’s why every vendor will trumpet the number of F500 customers they have, even if some of those companies are only buying paperclips from the vendor at the moment.

  3. Is this a product company or a sales company?
    My answer: They have to be both: these aren’t products that will sell themselves; and some of the buyers are very discerning, so if the products don’t really add value compared to the competition, there’s no sale to be had.

Back to #1, what will be the source of CRWD’s longterm advantage? Will it be sales or product? I’m not sure that’s really the right frame for the question. In a competitive fast-moving market, the people who can add the most to the company, whether it’s on the product side or the sales side, will always be looking for where they can be at the center of the action. As in hockey, they’re all trying to skate to where they think the puck will be. CRWD is currently seen as one of the companies that provide that advantage – but that can certainly change, and quickly.

  1. What are they going after? Better product? More sales? Profitability?
    My answer: Until relatively recently, the market demanded they pursue product opportunities and sales growth above all. More recently, the market is asking for profitability, and the CFO is telling us the company is making progress on that. There should be no question in anyone’s mind that this is a company that could be solidly profitable anytime they choose, just by dialing back the investment in future growth. They’re choosing to edge more towards profitability now, but the CFO is saying that future growth is still a big priority. I think that’s probably the right choice. The company is still down over 50% from its ATH, which means there are a lot of unhappy options holders in the workforce still. They need to keep trying to get the stock price back up. But if they focus too much on that and take their focus away from future growth as a result, their best people will leave them for greener pastures. It’s a balancing act.

@brandonwahl I don’t know if this is helpful to you – I’m trying to pull out your biggest concerns and respond. How did I do?



Thank you for the reply. In short, I’ve recently begun theorizing about modeling my portfolio with built to last companies, while still trying to capture as much growth as possible. Who doesn’t want to do that of course lol??? Portfolio management is off topic here, so I wont’ elaborate much more. Maybe the investment style here doesn’t entirely align with that, but I cannot outright ignore the wonderful companies that are discussed here. In that regard, I’m working through my portfolio, company by company, to see how things align with my recent shift in thinking.

Using Tesla as an example, lets be honest, money is falling into their lap right now due to very clear growth catalysts. They are rapidly selling more cars, they are rapidly signing up other carmakers on the charging network, foreign leaders are openly begging Tesla to open factories in their territories (surely with extremely beneficial financial incentives), self driving is not too far away, the CEO has people eating from his hand, i feel they have no meaningful, immediately threatening competition, and surely many other items I’m missing entirely. One substantial Tesla process that cannot be discounted for me is the publishing of their Master Plans. When reading Part 1 and Part Deux, they so clearly outline how they are going to grow, and then actually go out and do it. Part 3 is something I haven’t quite wrapped my head around yet admittedly.

Sure this may come across as cherry picking or unfair comparing, but when running a concentrated portfolio of 6-7 companies cherry picking the best is the absolute goal. At the moment, I personally am unable to directly, and most importantly, easily, link upcoming CrowdStrike developments to slam dunk returns given the field they compete in. To directly address your thoughtful reply, perhaps you stated in best that “consequently, this cannot be a set it and forget it type investment.”

Thank you very much for your reply.