Crowdstrike (CRWD) stock forecast 2021-2025: strong earnings make it a top growth stock pick
15:23, 31 March 2021
Cloud-based cybersecurity firm Crowdstrike left investors with kind of a bittersweet sensation after its latest quarterly report was published, as although the firm shattered the market’s expectations by beating both revenues and earnings forecasts, the stock has dropped almost 12 per cent since the numbers came out.
Now, with the share price approaching a critical support area, investors are probably wondering if they missed something about the company’s performance or if this could actually be an opportunity to get their hands on a fast-growing business at a decent price.
Join me in the following Crowdstrike share price forecast to take a closer look at the company’s latest price action and fundamentals.
Crowdstrike stock news
Crowdstrike earnings came out on March 16, 2021 and investors were dazzled by the performance of the company during its 2021 fiscal year, with sales jumping 82 per cent compared to a year ago at $874.4 million.
Subscription revenues accounted for 84 per cent of the company’s revenues while gross margins for the firm stood at 77 per cent, representing a 300 basis point improvement compared to the previous year.
Meanwhile, revenues during the fourth quarter landed at $264.9 million, representing a 74 per cent growth compared to the firm’s 2020 fiscal year, while also surpassing analysts’ forecasts of $250 million for the period as compiled by Capital IQ.
CRWD’s bottom-line performance also took analysts by surprise, as the consensus estimate was $0.08 in earnings per share for the fourth quarter, yet the company managed to exceed those estimates by 62.5 per cent, with its EPS landing at $0.13 per share by the end of the three-month period.
On the other hand, non-GAAP positive net income for Crowdstrike during the full fiscal year ended at $62.6 million compared to a $62.6 million loss posted in the previous year, as stronger sales led to positive earnings.
Crowdstrike also highlighted that the number of clients that have adopted multiple modules has continued to grow, with the percentage of customers currently enrolling for four or more modules standing at 63 per cent by the end of January 2021.
In regards to the future, Crowdstrike shared its guidance for the upcoming fiscal year, with the firm expecting to see revenues landing near the $1.3 billion area while non-GAAP net income should remain close to this year’s figure at around $60 to $70 million.
Similar to last year, most of the adjustment made to GAAP earnings was related to stock-based compensation expenses.
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Crowdstrike (CRWD) stock forecast 2021-2025
One interesting aspect of last year’s earnings report is that although Crowdstrike is expecting to see its sales jump by over $500 million in 2022, that growth will not be translated into higher earnings for shareholders.
For investors, the fact that such a material jump in sales – roughly 51 per cent compared to last year’s figure – does not translate into higher levels of profitability might be a bit disappointing.
One of the reasons given by Crowdstrike’s management about this disconnection between sales and earnings growth was the impact of higher interest expenses resulting from the acquisition of Humio.
During the earnings call that followed the release of the report, Crowdstrike’s CFO Burt Podbere emphasised that the financing used to complete the Humio deal will generate an annual interest expense of around $23 million for the firm.
If we add back those $23 million, that would mean that the firm could deliver around $86 million in non-GAAP net income in 2022 if it hits its guidance, which results in a 36 per cent jump in profits versus a 50 per cent uptick in revenues.
My guess is that the market might have reacted negatively to either the fact that the firm’s net margin will likely suffer for years as a result of this extra expense or market players don’t seem to be believing that Humio is worth as much to the firm as the management claims.
Whether I am right on those assumptions or not, the fact is that the price action went south following this quarterly report, with Crowdstrike shares apparently breaking below the neckline of a head and shoulders pattern – a situation that could result in a strong pullback in the following weeks.
The chart above shows that this threshold has already been crossed once, followed by a failed invalidation of the pattern, while the price finally succumbed to the formation’s bearish bias.
Now, the stock price is retesting its March 5 lows, which makes this a potential boom-or-bust moment for Crowdstrike shares.
If the price were to move below this mark, chances are that market players could aim to fill the stock’s December 4 gap, leaving us with a short-term CRWD stock forecast of $145 – representing a 17 per cent downside risk.
This view is reinforced by:
Negative momentum in both the RSI and the MACD.
A death cross seen in the stock’s 20-day and 50-day moving averages, which took place nearly 20 days ago.
A break below the neckline of the H&S pattern.
The successful filling of the 17 December bullish gap.
However, there is also the possibility that today’s bounce off this support level could result in a bullish move as a result of a double-bottom formation. In that scenario, a short-term bullish target would be set at $197 per share.
As I said, the next few days will be crucial to determine the direction that the stock will take from here.
CRWD stock: buy or sell?
19 out of the 23 analysts covering Crowdstrike, as compiled by MarketBeat, are currently rating the stock a buy, with the consensus Crowdstrike (CRWD) stock prediction currently sitting at $230 per share.
Based on those estimates, the stock seems cheap at its current level of $174 per share, providing long-term investors with a potential 32 per cent appreciation if that consensus target is hit.
Notably, multiple firms hiked their price target for Crowdstrike since the earnings report came out, including Royal Bank of Canada, Oppenheimer, and Needham & Company LLC.
Meanwhile, RBC Capital Markets made a few positive comments about the firm’s fourth-quarter results, highlighting that the company had a “very strong” quarter while mentioning that the acquisition of Humio could accelerate revenue growth as the firm is setting its foot in a promising $4.9 billion market.
Could our short-term Crowdstrike stock forecast be right even as analysts are as bullish as they can get on the firm?
Sure. For once, these estimates aim to determine where the stock price might land in a period of 12 months, while the following forecast is only aiming to determine where the stock might be in a few weeks based on the current price action.
FAQs
Will crowdstrike (crwd) stock go up?
Is Crowdstrike a good stock to buy as a long-term holding?
Overall, it seems that, in the long-term, Crowdstrike could continue to grow its revenues at a fast pace. That said, whether the current valuation justifies an investment or not depends on whether higher sales can translate into higher earnings.
If we deduct the impact of higher interest expenses from the firm’s expected 2022 adjusted net income, it would appear that CRWD is achieving earnings growth alongside revenue growth – which is positive.
If that continues to be the case in the following years, chances are that this firm can become quite an appealing long-term investment as its total addressable market is big enough to support further growth while the company’s management has already shown that it can deliver sound results for shareholders.
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