Leading CrowdStrike Price Target as Cybersecurity Reaches 'Inelastic Demand'
Almost as if under the radar, as the financial media has not been all over the story, has been the run of cybersecurity stocks so far in 2025.
I mean, we knew it had to happen. The environment created by the internet, and then the cloud and now by artificial intelligence has pushed cybersecurity software from the "in demand" category into the "inelastic demand" category. There is no way to run any kind of business in 2025 or even run a household, without investing in securing one's data, and one's sensitive information.
I have long written that CrowdStrike Holdings (CRWD) was my top pick in the space as that firm offers, what is in my opinion, a "best-in-class" service. Even after last year's debacle that involved Microsoft (MSFT) and a number of major companies across a host of industries, I maintained that view and discussed taking off some risk and adding it back on at what I thought were better points of entry or reloading. The stock is now the third-largest allocation on my most active book and is not that far away from being number two.
CrowdStrike Performance
As of the close of business on Tuesday afternoon, the S&P 500 stood up 3.16% year to date, while the Nasdaq Composite has risen 2.19%. In comparison to that broader market performance, the First Trust Nasdaq Cybersecurity ETF (CIBR) is up 5.75% and the Global X Cybersecurity ETF (BUG) is up 7.67%.
Now, check this out. In comparison to that ETF performance, which is much better than broader equity market performance so far in 2025, two names I have dabbled in within the past half year, Zscaler (ZS) and Palo Alto Networks (PANW) are up 13.45% and 6.03%, respectively. On top of that, my two picks, SentinelOne (S) , which is a longer-term investment, is up 9.91% and our baby, the star, CrowdStrike, is up an incredible 19.44% year to date. All hail the mighty!
CrowdStrike Earnings
CrowdStrike Holdings is still a long way from reporting the firm's fiscal fourth quarter financial results. For the third quarter, reported in late November, the firm posted an adjusted EPS of $0.93 on revenue of $1.01 billion. Both numbers beat Wall Street, while that sales print was good enough for year-over-year growth of 28.5%. Adjusted subscription gross margin was 80%, operating cash flow printed at $273.5 million and free cash flow landed at $230.6 million.
The firm will put its FQ4 numbers to the tape in early March. Consensus view is currently for an adjusted EPS of $0.86 on revenue of $1.03 billion. That would be down from $0.95 for the year-ago comparison. Remember the business was peaking last year ahead of the summertime problems that forced a recovery. That said, this sales expectation would still be good for annual growth of about 22.4%.
Wall Street's View on CrowdStrike
On Tuesday, five-star rated (at TipRanks) analyst Trevor J. Walsh of JMP Securities reiterated his "Market Outperform" rating on CRWD, which is a buy-equivalent rating, but oddly failed to up his $400 target price. Remember, the stock had closed at $373.75 on Monday, when Walsh probably wrote his piece that was released at 6 a.m. on Tuesday morning.
Even better, almost two weeks ago, the five-star rated Fatima Boolani at Citigroup reiterated her "buy" rating on CRWD, while increasing her target price from $400 to $420. Fatima wrote that piece up when CRWD was trading in the $360s, so that was impressive.
CrowdStrike Stock Fundamentals
As of the end of the fiscal third or October quarter, over the prior 12 months, CrowdStrike had generated operating cash flow of $1.383 billion, and free cash flow of $1.163 billion.
In addition, the firm had a cash position of $4.26 billion, a headline current ratio of 1.85, and a current ratio adjusted for deferred revenue of 8.75. That's not just strong. That's mighty. All hail the mighty. The firm had no current or shorter-term debt on the books in October but did have $744 million in long-term debt on the books that the firm could take care of almost six times over out of pocket. The skinny? This balance sheet is better than fortress-like, it's golden.
CrowdStrike Stock Chart
We've discussed this chart in the past. I don't think I have shown it to my readers since that earnings release in November though. Clearly, all trends discussed at that time are still on cruise control. On Tuesday, CRWD exceeded the highs of last July ahead of the firm's ride over the falls in a barrel. That's quite a recovery. I gave you a $445 target price at that time, which is still the high target on Wall Street. (Anyone else notice that I am almost always a couple of light years ahead of these sell-side "professionals"? No wonder I went out on my own in 2016. Should have done it much, much earlier.)
That does create a possible problem. That problem is known as the double-top pattern of bearish reversal, which can really only be seen in hindsight. The fact is that when a stock takes on an old high, the possibility for such a pattern to develop does exist. I'll remove my work above and show you what that would look like...
I like my version better, but be fully cognizant that somewhere, someone is working on a bear thesis based on this possibility. Aside from these technicals, the indicators are solid. Relative strength is strong but not overbought. The daily MACD is in good shape, with the histogram of the nine-day EMA now above zero and with the 12-day EMA running above the 26-day EMA with both of them above zero. All hail the mighty.
A CrowdStrike Price Target
Target Price: $445 (a reiteration)
Pivot: $414 (moving trendline, up from $373 in November)
On a take and hold of that pivot: Target price is likely revised above $490.
Add: Down to the 50-day SMA (currently $360)
Panic: Loss of 200-day SMA (currently $321)
At the time of publication, Guilfoyle was long CRWD, S and MSFT equity.