This is very abbreviated from a public Seeking Alpha news piece about a survey of software buyers
A one-year-later follow-up to a Mizuho survey of security software buyers in the United States - chief information officers and chief information security officers - shows a clearly favorable view of the market and indications for stronger Q2 spending, the firm says…
Network security is seen as the most important area…
As for where the data looks bullish, Mizuho says it’s for the four hypergrowth vendors: CrowdStrike (NASDAQ:CRWD), Zscaler (NASDAQ:ZS), Okta (NASDAQ:OKTA) and Cloudflare (NYSE:NET).
“An impressive 69%” of CISOs and CIOs that are CrowdStrike customers expect to buy more than one additional module in the coming year, significantly better than 44% a year ago. The firm is raising its price target on the company to $295 from $255, implying 13% upside…
With Zscaler, a higher-than-expected 40% of respondents said they had leveraged an emerging SASE technology to displace on-premise firewalls and VPNs. Mizuho raises its Zscaler price target to $250 from $225, implying 10% upside.
And with Okta, 54% of respondents said they are “now far more likely” to consider Okta for customer identity, considering the recent Auth0 transaction. Mizuho’s Okta price target rises to $275, implying 12% upside.
And some 65% of respondents that are Cloudflare customers expect to buy more than one additional solution in the coming year…
They almost slipped this by me, but 69% of Crowdstrike customers expect to buy more than one additional module… while 54% of respondents said they were far more likely to consider Okta for customer identity. There’s a big difference between “expect to buy” and “likely to consider”!
Here’s what I took away:
83% of respondents said Q2 2021 was higher than expected. In Q2 2020, only 54% of respondents said that.
32% of respondents spent much more than usual compared to 12% last year.
Note: #1 and #2 asked about actual spending in the past quarter so it’s spending that’s already occurred but hasn’t yet been reported in the Q2 earnings results.
Mizuho (designer and conductor of the survey) calculated that the average 2021 budget increase will end up being 18% over 2020. But the largest customers (over $5B in revenue) are expected to grow their budgets by 25%. Great news for CRWD because CRWD has 61% of Fortune 100 companies and 43% of Fortune 500 companies. When I compared SentinelOne to CRWD, the average dollars spent per customer was several times higher.
36% of security spend was in the cloud. It’s expected to grow to 40%. I don’t know what it was previously but I’d guess that the portion of spend on cloud-based security is increasing.
As Saul pointed out, 69% of CISOs and CIOs of CRWD customers expect to buy more than one additional module. That means they will buy 2 or more. We know that as of the end of Q1 (30Apr) that CRWD customers had the following number of modules:
64% have 4+ modules
50% have 5+ modules
27% have 6+ modules
We also know that adding another modules is close to 100% margin. And we know that CRWD has 17 modules available for purchase. So there’s a big opportunity for growth AND profit from existing customers buying more modules. And there’s room to grow since only 27% have 6+ modules (meaning 63% have fewer than 6) and there’s 17 available.
The Mizuho report seems to foretell a very strong Q2 (1May - 31Jul) result which I expect will be announced on Sept 1st.
They had 19 modules as of the last quarterly call:
“ Our platform includes 19 modules and easily allows customers to consolidate agents…”
It is going to be very interesting to see how those module adoption numbers change this quarter.
“They almost slipped this by me, but 69% of Crowdstrike customers expect to buy more than one additional module… while 54% of respondents said they were far more likely to consider Okta for customer identity. There’s a big difference between “expect to buy” and “likely to consider”!
Isn’t there a difference between respondents and customers?
From this paragraph it seems that the indicated 54% for Okta are about companies that are not customers yet, while the indicated 69% for CrowdStrike are companies that are already customers of CrowdStrike. Which makes the “expect to buy” and “likely to consider” more sense, since it’s easier to upsell to customers than acquire new ones, at least I think so. I’m from Europe and English is not my mother language so maybe I didn’t understand it the right way, if so my apologies.
It seems to me that the way the original article has been written is confusing.
I’m an Okta bull and see here that over 50% of the survey participants are likely to obtain additional product like Customer Identity, so there is a chance that same participants are already using Oktas Workforce Identity. So this would be very similar to Crowdstrike extra module but depending on the size of their customer base can be actually quite significant revenue contribution.
I saw a publicly available Barrons article on this.
Though I differ from your interpretation of Crowdstrike vs Okta. I believe:
69% of Crowdstrike customers expect to buy more than one additional module
54% of respondents … far more likely to consider Okta
are 2 very different data sets and metrics. Drawing a direct comparison to imply CRWD is in a better situation from this report is misleading, IMHO.
There certainly is a difference between “expect to buy” and “likely to consider” when the starting point is the same, but …
- The 1st is saying that the majority of existing CRWD customers are going to increase their spending with CRWD.
- The 2nd is saying that the majority of new “customer identity” customers will likely consider OKTA.
Thus 2 different sets of potential customers with different objectives.
One could easily argue that the new customer identity customer pool is much larger than the existing CRWD customer pool - while also arguing that “expect to buy” is more likely to turn into business than “likely to consider”.
Both are bullish indicators (along with the overall increased Q2 spending) and Moskowitz labeled both CRWD and Okta as “most bullish”, along with NET and Zscaler. And while I generally don’t follow price targets, it is encouraging that he raised his significantly:
- CRWD - $295 from $255
- Okta - $275 from $255
- ZS - $250 from $225
- NET - $96 from $77
The Barrons article also discussed a research note from Patrick Colville of Deutsche Bank who highlighted Zscaler (another of stock here) as a best positioned competitor (as well as Palo Alto Networks) in the Secure Access Service Edge segment. Colville upped his ZS target price to $282.
I like where these are at and feel good about the next round or earnings reports.
- that would be the 1st place Giants with the best record in the MLB at this moment
Long CRWD, OKTA, NET & ZS
- though my CRWD position is ~4x my OKTA/ZS/NET positions - indicating that while I am bullish on Okta, I am more so on CRWD