CrowdStrike Quite Period Ends: Here's What Analysts Are Saying

The quite period for Crowdstrike Holdings Inc CRWD has come to an end after its initial public offering on June 12. Multiple analysts are now able to publicly discuss their thoughts on the cloud-delivered cybersecurity company that leverages artificial intelligence to protect customers.

The Analysts

Bank of America's Tal Liani initiated coverage of Crowdstrike with a Buy rating and $75 price target.

JMP Securities' Erik Suppiger initiated coverage at Market Outperform, $80 price target.

Stifel's Gur Talpaz initiated coverage at Buy, $80 price target.

Mizuho Securities' Gregg Moskowitz initiated at Buy, $80 price target.

SunTrust Robinson Humphrey's Terry Tillman initiated at Hold, $69 price target.

Shares of Crowdstrike traded higher by 3.9% at $69.87 at time of publication.

BofA: Executing Well Against Industry Transition

Crowdstrike is not only well positioned to gain market share in the $7 billion endpoint security market but can disrupt the security segment in adjacent categories, Liani said in a note. As such, the company's total addressable market potential could triple in size to more than $20 billion.

Liania said Crowdstrike's strong performance comes at a time when the entire industry is transitioning away from legacy antivirus platforms to behavioral-based and next-generation platforms. This is where Crowdstrike "shines" given its superior machine learning, threat intelligence and 100% cloud-based architecture.

JMP: Bullish Points

The bullish case for Crowdstrike's stock is based on a few positive attributes, Suppiger said. These include:

• Status as the "premier brand and thought leader" in endpoint security.
• Exposure to a market that is "ripe for disruption."
• An attractive pipeline of production expansions.
• A capable management team with the necessary experience to oversee growth and profitability.

Stifel: Valuation Discussion

One of the bigger questions surrounding Crowdstrike's stock is its valuation, Talpaz said. Shares are trading at 18 times fiscal 2022 estimated sales, which is a premium to its peers. The company boasts multiple encouraging attributes, however, which makes the case that Crowdstrike's stock should trade at a higher multiple inline with other recent successful IPOs, including Zscaler Inc ZS and Okta Inc OKTA.

The research firm's $80 price target is based on a 23 times forward multiple, which Talpaz said is consistent with trading multiples of Zscaler and Okta.

Related Link: CrowdStrike Opens For Trade Well Above IPO Price

Mizuho: Standing Out Against Peers

Mizuho's first-hand checks point to Crowdstrike gaining market share at the expense of antiquated legacy vendors, most notably McAfee, Symantec Corporation SYMC and Sophos, Moskowitz said. In fact, if Symantec sells itself as recent media reports suggest, Crowdstrike could benefit even more at the expense of Symantec's displacement.

The analyst said Crowdstrike's expansion is also evident in financial metrics as its customer count more than doubled in fiscal 2019 at more than 2,500 customers. Current projections call for more than 1,600 net new logos in fiscal 2020.

The company is also adept in cross-selling services as 47% of subscription customers bought four or more cloud modules which is up from 30% in fiscal 2018.

SunTrust: 'Powerful' Model Built In To Valuation

Crowdstrike's potential to show a triple-digit ARR and subscription revenue growth through at least the first quarter of 2020 gives it a "powerful model," Tillman wrote in a note. Other attractive attributes include a strong customer retention, gross margin improvement potential, and a strong operating leverage despite heavy investments.

Many of these multiple positive characteristics is "likely reflected" in the current valuation, however, and a "less favorable" near-term risk-reward profile implying a neutral stance on the stock is warranted.