Timothy SeymourCrowdStrike HoldingsCRWDCOMMENTJun 02, 2021

Powerful, lightweight solution. Leader in the group. Prefers it to FTNT.

An analyst recommend Palo Alto, Fortinet and Crowdstrike, citing tailwinds that continue to be increasing cyber-threats, SEC requiring companies to disclose hacks, and easier growth comps. Nothing new. He likes this space.

Was the 3rd-best Nasdaq stock in 2023. Up nearly 150%, purely on fundamental growth. Cybersecurity is the guaranteed secular bull market for the next 10 years. These companies can have a few soft quarters, but it's law that companies must announce cyber breaches. They must have cybersecurity. He's a long-time investor since 2020 and won't trade it. At an all-time high. It's not even in the S&P yet, but the stock is young.

It reported record annual recurring revenue yesterday and shares jumped as well as record free cash flow and record operating profits. They raised their full-year forecast.

It reports next week, and is a big holding of his. The market likes the cybersecurity space, so this is set up nicely.

Hit a 52-week high yesterday, but he sees further upside in the cybersecurity stocks.

He spoke to the CEO who said the company has gone cash-flow positive. He expects their next quarter to be a hit.

Last week, they beat top and bottom lines, and raised guidance full-year. Shares jumped 11% since then.

Numbers/outlook were good. CRWD reported EPS of 74c vs estimates of 56c. Sales were $731M vs estimates $724M. Sales rose 6% but recurring revenue rose sharply, it won a very large single order, and profitability is improving fast. Guidance was increased, though not by a huge amount. The backlog is growing, it has $2.4B net cash, and we would consider these very solid results overall.
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Computer network attacks and Palo Alto's performance make this a long-term hold. The options market is pricing 7.9% up, slightly volatile. Guidance was conservative last quarter which will help jump over a low bar. Revenue year-over-year in the mid-30s is very attractive.

After Palo Alto's recent report, he expects a good quarter from Crowdstrike next week. Options price in an 8% move, and he expects an above-average move in line with fellow cybersecurity names.

The Falcon is their flagship and they were talking about AI long before it caught on. The more clients join their cybersecurity network, the stronger that network gets, based on the way it's designed. Fundamentals are great and he sees more growth.

He targets $170.50. This and Sentinel are the leaders in this sector. CRWD has the infrastructure to scale up. Are second only to Microsoft to execute. Own it here and add at $142 then $135 on pullbacks.

He bought this in early March at $126 and sold it today at $147. It's the least profitable cybersecurity stock and he's a little troubled by the rising move in interest rates, not peaking as he expected. So stocks like Crowdstrike will be challenged. This is a valuation trade, and he will buy Palo Alto and/or Fortinet at a lower price (they have lower valuations). Ring the register and take profits. Fortinet generates strong free cash flow, and also scores well in ROE and debt-to-equity. Maybe not a super balance sheet, but they have the flexibility to do the things they want, because they have profits today. So, they're less reliant on funding from the debt markets and less effected by rising rates.

They continue to execute. They were doing AI before it was cool. Enterprise spend is not as easy as in past years, but deals will still close just later.