Yahoo News CrowdStrike (CRWD) Ups Outlook for Key Margins on Strong Demand
CrowdStrike Holdings, Inc. CRWD recently raised its outlook for key margins over the next three to five years as the demand for cybersecurity solutions continues to increase amid rising cyberattacks. The company updated the outlook at the company’s Fal.Con presentation.
CrowdStrike now targets its Subscription non-GAAP gross margin of 82%-85% in the next three to five years, up 400 basis points (bps) from its previous guidance. Moreover, it forecasts that non-GAAP sales & marketing (S&M) and general & administrative (G&A) expenses as a percentage of revenues will contract 200 bps each from its earlier guidance range to 28%-33% and 5%-7%, respectively.
However, non-GAAP research & development costs as a percentage of sales will remain between 15% and 20%. An improvement in the gross margin, along with lower S&M and G&A expenses as a percentage of revenues, will drive the non-GAAP operating margin higher by 900 bps from its previous guidance range to 28%-32%.
Additionally, CrowdStrike also anticipates that its free cash flow margin will improve by 500 bps from its earlier projection to 34%-38%.
CrowdStrike Price and Consensus
CrowdStrike price-consensus-chart | CrowdStrike Quote
Strong Fundamental Drivers
CrowdStrike is a global leader in next-generation endpoint protection, threat intelligence and cyberattack response services. Shares of CrowdStrike have rallied 54.3% year to date (YTD) compared with the Zacks Computer and Technology sector's return of 34.7% during the same period.
The company is benefiting from the rising demand for cyber-security solutions due to the slew of data breaches and the increasing necessity for security and networking products amid the growing hybrid working trend. The continued digital transformation and cloud migration strategies adopted by organizations are key growth drivers.
Additionally, CrowdStrike is capitalizing on its Falcon Platform. CRWD’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps add users.
CrowdStrike partnered with Amazon’s AMZN Amazon Web Services to create innovative generative AI applications. The new Charlotte AI leverages the generative AI capabilities of Amazon Bedrock within Amazon Web Services.
Furthermore, in Zscaler's ZS recent collaboration with Imprivata to provide security services to healthcare organizations, the integration of the CrowdStrike Falcon Zero-Trust Assessment score has been in place since 2021.
Moreover, strategic acquisitions like Reposify, SecureCircle and Humio have expanded the company’s product portfolio and capabilities, thereby helping it acquire new deals. Also, CrowdStrike recently announced that it has signed an agreement to acquire the Palo Alto-headquartered application security posture management (ASPM) platform provider, Bionic.
The latest buyout will be a strategic fit for CrowdStrike as the Bionic ASPM platform complements the company's existing Security and IT Operations product suite. The acquisition will make CrowdStrike the first cybersecurity firm to provide complete code-to-runtime cloud security from one unified platform.
CrowdStrike has been witnessing top-and-bottom-line growth for the past several quarters due to the strong demand environment for cyber-security solutions and its sustained focus on enhancing product offerings through in-house research and development and acquisitions.
In the most recently reported financial results for the second quarter of fiscal 2024, the company’s revenues and non-GAAP earnings surged 36.7% and 105.6%, respectively, on a year-over-year basis. Subscription revenues (94.3% of the total revenues) jumped 36.3% year over year during the second quarter. In fiscal 2023, CRWD’s revenues rose 54.4% year over year to $2.24 billion, while non-GAAP earnings surged 130% to $1.54 per share.
Zacks Rank & a Stock to Consider
Currently, Amazon sports a Zacks Rank #1 (Strong Buy), while CrowdStrike and Zscaler each carry a Zacks Rank #3 (Hold). Shares of AMZN and ZS have rallied 53.9% and 32.9%, respectively, YTD.
A better-ranked stock from the broader technology sector worth considering is NVIDIA Corporation NVDA, which sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA's third-quarter fiscal 2024 earnings has been revised upward by 47.6% to $3.32 per share in the past 30 days. For fiscal 2024, earnings estimates have increased by 36.1% to $10.67 per share in the past 30 days.
NVIDIA’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, the average surprise being 9.8%. Shares of NVDA have surged 180.6% YTD.
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