Crowdstrike stock analysis. CRWD stock.
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Crowdstrike just reported Q1 numbers and the market’s response was, well, not great. Shares are down 11% after hours but it’s not obvious why.
On its face, the report looked good. Revenue was up 42% to 693 million, annual recurring revenue was also up 42%, gross margin increased 1% and the company generated 227 million in free cash flow.
Looking at the bigger picture that means Crowdstrike has generated 2.4 billion dollars of revenue over the last 12 months, 782 million of free cash flow and negative 151 million of net income.
The enterprise value is just under 31 billion so the company is now valued at 13 times revenue and 40 times free cash flow.
Crowdstrike also released strong guidance for the rest of the year with revenues forecast to come in at 3 billion so why is the stock down?
Perhaps the main reason is that the company is still not showing positive net income. The company is guiding for 580 million of non-gaap net income for the rest of the year and a lot of that gets eaten up by stock based compensation.
More generally, Crowdstrike is an expensive stock. It trades at 57 times adjusted net income and 13 times revenue. When expectations are so high, it’s easy for earnings to disappoint investors.
And although Crowdstrike continues to grow, its revenue growth rate has dropped every year now since it went public.
Considering this year’s growth is expected to come in around 36%, the analyst forecast for above 30% growth for the next few years looks optimistic.
So lets consider one hypothetical scenario where Crowdstrike hits 3 billion in revenue this year and then compounds at 25% growth for the four years after that. That would put revenues at 7.3 billion and a 20% net margin puts net income at around 1.5 billion in 5 years time.
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