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CrowdStrike: Underappreciated Opportunity

Richard Durant profile picture
Richard Durant


  • CrowdStrike is a rapidly growing cybersecurity company with best of breed technology.
  • Cloud native enterprise IT security approach with frictionless deployment and a focus on protecting distributed workloads on devices outside the traditional corporate perimeter.
  • CrowdStrike’s approach utilizes user data and artificial intelligence to improve threat detection creating network effects in their business.
  • CrowdStrike's valuation is high but this reflects their potential to become the leader in a large and growing market with high margins.

The shift from on-premise to cloud computing over the last 15 years has created opportunities for cloud-native vendors to displace traditional enterprise software companies across a range of verticals such as human resources, customer relationship management and cybersecurity. CrowdStrike (NASDAQ:CRWD) is one of the leading providers of cybersecurity services designed for deployment in the cloud with a focus on protecting workloads distributed across a range of endpoints like mobile and IoT devices which lie outside the traditional corporate perimeter.

Their approach utilizes user data and artificial intelligence to detect threats and prevent breaches using an automated approach which could potentially improve with scale as more users are added. CrowdStrike’s best-in-class services along with the potential for improving service quality with scale could result in a sustainable competitive advantage which would more than justify CrowdStrike’s current share price.


The trend towards cloud computing and workforce mobility along with growth in connected devices in recent decades has resulted in a rapid expansion of workloads across endpoints. Devices, applications and data are becoming increasingly distributed and diverse which is making protecting workloads across various endpoints more challenging and this will be exacerbated in coming years with the rise of IoT enabled by 5G networks.

Table 1: Development of Cybersecurity Market

(Source: Created by author based on data from Check Point Software)

The threat posed by cybercrimes is increasing over time, for example security breaches have increased by 67% over the last 5 years. In addition, adversaries are well-organized with access to significant technological and human resource and are becoming more highly trained. Adversaries today range from militaries and intelligence services of well-funded nations to sophisticated criminal organizations who are motivated by financial gains. Breaches may involve theft or holding data hostage in addition to causing disruptions to businesses, which can have a significant financial impact.

This article was written by

Richard Durant profile picture
Richard Durant is the leader of Narweena, an asset manager focused on finding market dislocations that are the result of a poor understanding of a businesses long-term prospects. Narweena believes that excess risk adjusted returns can be achieved by identifying businesses with secular growth opportunities in markets with barriers to entry. Narweena’s research process is focused on company and industry fundamentals with the goal of uncovering unique insights. Narweena has a high risk appetite and a long-term horizon, in pursuit of stocks that are deeply undervalued. Coverage tilts towards smaller cap stocks and markets where competitive advantages are not obvious.Investments are driven by a belief that an aging population with low population growth and stagnating productivity growth will create a different opportunity set to what has worked in the past. Many industries are likely to face stagnation or secular decline, which counter-intuitively may improve business performance if competition decreases. Conversely, other businesses are likely to face rising costs and diseconomies of scale. In addition, economies are becoming increasingly dominated by asset light businesses, and the need for infrastructure investments is declining over time. As a result, a large pool of capital is chasing a limited set of investment opportunities, which is driving up asset prices and compressing risk premia over time.Durant has undergraduate degrees in engineering and finance from the University of Adelaide (Honors) and an MBA from Nanyang Technological University (Dean’s Honors List). He has also passed the CFA exams.Durant also publishes musings on technology and its long-term impact on economic development on Substack (http://richarddurant.substack.com).

Analyst’s Disclosure: I am/we are long CRWD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

Value Digger profile picture
CRWD's insiders and venture capitalists have unloaded MILLIONS of shares since last December, when the lockup period expired, according to the filings.

And they keep selling their shares to the inexperienced and/or ignorant investors who swallow "the growth pill" and blindly buy growth at any price, according to the latest filings below:


CEO Kurtz Sells 64,722 Of CrowdStrike Holdings Inc >CRWD

Dir Sexton Sells 12,500 Of CrowdStrike Holdings Inc >CRWD

Chmn Watzinger Registers 110,000 Of CrowdStrike Holdings Inc >CRWD


Dir O´Leary Sells 24,000 Of CrowdStrike Holdings Inc >CRWD
CRWD way overpriced, over hyped and nowhere near a buy. This company is built on a hype. Blackberry is the one that is going to win. With the acquisition of Cylance and AI integrated now into QNX. Blackberry is going to win this race. Crowd has an 11 billion evaluation on less then 500 million in sales, Balckberry has a 2.5 billion evaluation on 1.3 billion in sales and many more verticals where CRWD only has 1 product. CRWD will see this stock below $20 faster then you think. You can buy Blackberry for 4$ and change and CRWD is over $50 for less then half the size of Blackberry, BUY BLACKBERRY!
rt94103 profile picture
No mention of their role in the "DNC hack," FBI investigation, and recent recanting of their "it was Russian state operatives who hacked the..." There's as much risk with this company as there are with companies associated with Peter Strzok's family or the Awan brothers (IMO).
Great another conspiracy theorist. Tell me about your cybersecurity credentials how you use them to disprove the findings.
Value Digger profile picture
Richard Durant, a few more remarks:

1) As noted in my recent CRWD article, cybersecurity is a crowded space where the fierce competition is getting fiercer every year, which is a major headwind for CRWD.

A little perspective here. As of 2018, there were more than 1,200 cybersecurity companies with up to 200 vendors competing in each layer.

Given that the cybersecurity industry currently is at peak SATURATION, large-cap companies can offer a more intrinsic approach to problems.

Therefore, expect to see smaller vendors such as CRWD repeatedly challenged by large players such as Fortinet (FTNT), BlackBerry's (BB) Cylance, VMW's endpoint security company Carbon Black (CBLK) etc. that already own the server endpoints, mobile endpoints or websites.

2) I strongly suggest that you do NOT downplay the relative valuation analysis and the fact that CRWD currently trades about 25 times its revenue (!).

As shown in your charts, Sophos Group (SPHHF) is a leader in cloud-enabled next-generation cybersecurity.

Sophos Group was acquired a few months ago by Thomas Bravo for about 5 times its revenue, as shown in detail in my CRWD article.

Also, RSA (DELL's cybersecurity unit) was sold a few days ago for approximately 2 times its revenue.

3) CRWD's "brain" left the company a few days ago. Dmitri Alpetrovich was the Chief Technology Office and co-Founder.

He has been with CRWD from DAY ONE and he is the guy who has created CRWD's Falcon endpoint product.

This is a key development that has passed unnoticed so far but it will weigh on CRWD sooner or later.
Value Digger profile picture
Richard Durant,

1) CRWD is the definition of BUBBLE at the current price levels.

And we advise investors NOT to buy growth at any price because every stock has its price.

Specifically, unprofitable CRWD currently trades about 25 times its revenue, which is BY FAR the HIGHEST EV-to-Revenue multiple in the cybersecurity sector.

CRWD's peers trade below 10 times revenue, as shown in detail in our article below.

Also, the suitors have paid from 2 to 8 times the revenue of the takeover targets based on all the recent cybersecurity deals, as shown in detail in our article below:


I personally have been 30 years in the stock markets and I have never found that it has paid off to buy growth stocks indiscriminately, regardless of valuation. Lots of investors have made a lot of money over the last years largely thanks to the cheap money from the Fed's QEs, which has made them think that they are knowledgeable investors. They are just extremely lucky.

2) As shown in my article above, many of CRWD's peers are profitable while CRWD is NOT going to be profitable (on a GAAP basis) in the foreseeable future, based on its OWN guidance.

CRWD expects to achieve non-GAAP operating income breakeven in the fourth quarter of fiscal year 2021.

3) CRWD's existing revenue growth YoY is NOT sustainable. Based on its latest reports, deceleration is already here and material deceleration is on the horizon.

CRWD's 80% YoY revenue growth with quarterly revenue at or below $100 million is easy. But 80% revenue growth with quarterly revenue at $300 or $500 million is impossible given also that the cybersecurity competition is fierce and growing.

Specifically, more than 300 cybersecurity startups are created every year, according to Momentum Cyber, an advisory firm focused on the cybersecurity sector below:

benyboy profile picture
This 12 Billion valuation scares me. under 500 million a year in revenue? I don't think this is gonna hold up in this market. similar to fire eye- bag holders are gonna dump if the stock drops
Wildstar profile picture
All of those Crowdstrike Bulls are getting taken to the Woodshed as the Insiders get out while they can still salvage some profit as the market tanks.
Yes and even FEYE’s revenue is close to $1b now and only trades at less then 3x revenue, so CRWD 25x is crazy and beyond over valued.
Emdubya profile picture
Back in the days of the dot-com bubble, every hopeful start-up that was jumping on the band-wagon described itself as "best of breed". Since then, anyone who was around during that time has avoided using that term (along with "robust" and a few others). I've seen it used a couple of times recently; I usually just laugh and move on, but perhaps it's history starting to repeat itself.
mag1205 profile picture
CrowdStrike is getting all the attention but very meager earnings. potential for growth has slowed and will come down much faster. Too many Cyber Security companies competing for current market. CrowdStrike stock is trading almost 30 times its yearly earnings. Can not sustain such hyper valuation.
Downtown10 profile picture
mag1205, I think you mean 30 times sales. Which I agree is far too high in such a competitive environment.
mag1205 profile picture

yes, you are correct.
Great article, on my radar now for after the Corona hangover
Fantastic article !
Hi Richard,

Thank you for the article! It contains a lot of useful information and analysis on the market which is great.

My concerns with CRWD is the recent sudden departure of their CTO which was the master mind behind their Falcon technology. The other note is that end point security is not relatively competitive, but extremely competitive market, and was never more than a commodity in the security field. It's good that they are leaders in AI detection, but other security plays are working on similar tech.

The other limitation with CRWD is that they are unable to protect the campus, mission critical devices, or actual data centers. PANW has their own Cortex XDR, in addition to pure perimeter protection for the campus and SASE based solution (competing with ZS also).

I think given the above, I am not sure how much market can CRWD can capture, and if their stock price can reach $100. I personally find NET, FTNT (with some concerns), and OKTA as better security plays, given the extremely competitive market.
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