First of all, disclosure, my investing record mediocre to poor. My retirement is funded by my being a very good saver and home ownership near Silicon Valley. You want investment advice, talk to Dreamer. As Will Rogers might say today, “all I know is what I read on Seeking Alpha”.
Having said that, I am cautiously bullish on Crowdstrike over my targeted investment period which is 2 to 3 years. That is a massive cop out, I know. I am not bullish on anything at the moment, if the time frame is 6 to 9 months. Of course we are in a relatively dead period between 3rd and 4th quarter earnings, but my stocks are witnessing 5% to 10% swings in a day without any stock specific news. It is all macro.
It is tempting to say that CRWD is a good value now. But most such comments really mean that they are a good value relative to some metric. This might be historical CRWD stock price, or it might mean relative to other high growth stocks, but for the most part it doesn’t mean relative to Investing 101 value metrics. Bert Hochfeld is the value guru in hypergrowth IT companies. He compares EV/S for a company’s growth rate cohorts and then tweaks for free cash flow. But if the entire cohort, and cohort of cohorts, are inflated, then the comparisons don’t mean much. CRWD held up until recently and the current weakness probably reflects the remaining air coming out–that security is not recession proof.
We know what has happened recently. Comments from the last 5 weeks or so:
“But the fact is that valuation for Crowdstrike, cheap heretofore, has become even more compelling. The EV/S ratio is now less than 10X. But the combination of a free cash flow margin of 30% and growth that is in the low to mid 30% in a recession year, brings the valuation of the company to far below average for its growth cohort.”
“With an increased free cash flow margin, the company’s Rule of 40 metric is now over 60. Cybersecurity according to all available surveys has been and remains a user priority, and Crowdstrike is the leader in one component of the space, now on sales at an EV/S of less than 8X.”
"CRWD ended 2022 with an EV/S of just above 8%.a free cash flow margin just above 30% and a growth estimate for the next 3 years of greater than 40%. "
“Crowdstrike shares now have an EV/S of about 7.3X, and a projected free cash flow yield of 4.2%. Of course, these latter two metrics are as attractive as any for a hyper growth company”
Rule 1 here, “It can always go lower”.
At some point this market sentiment is going to turn around. Since I was savaged over the last year, I want to be in the market when the mood changes. 2 to 3 years I am looking at stocks that I think will more than double. I think CRWD is one of those. But why buy now? That is why I am 50% cash and getting more invested on a slow, regular basis. Dreamer ended the year in good shape. If he is holding cash when the spring unloads, he get on the train come out very nicely. That is why we have different cash % with pretty much the same market and growth stock views.
Now, did I hold onto the CRWD that was assigned? Yes. But, I turned around and wrote calls near the put strike price. And made some straight sells. I am targetijng a cost investment of 5% of portfolio value for 20 stocks. CRWD was 6.4%t after a put assignment. If these $101 calls are assigned, then I will buy back enough shares to put my cost at 4.5% of port value and give myself a little room to sell a put and to let CRWD earn its way back to equal weighting.
So I am happy to have around 5% position in CRWD. Most of my stocks are in 2% range so this was an existing position that I did not sell down (it did that job by itself) I am looking for 100% gain in, say, 2 years. Average 1-year price target of analysts is $171 (just looked that up, was not a factor in my target).
KC, just a guy on the internet