A New Bull Market Has Begun, but It’s Not Too Late to Buy This Unstoppable Artificial Intelligence (AI) Stock
The S&P 500 index bottomed in October 2022 following a 10-month slide that culminated in a technical bear market. It took the index more than a year to climb back to a new all-time high, which happened in January 2024. It was the final hurdle the S&P 500 had to clear before investors could formally recognize the new bull market.
A number of high-quality stocks are now hovering near all-time highs, but that doesn’t mean it’s too late to buy. CrowdStrike (NASDAQ: CRWD) is one of them. It’s a leading provider of cybersecurity products powered by artificial intelligence (AI), and its stock is soaring on the back of the company’s impressive financial results.
Here’s why it’s not too late for investors to buy CrowdStrike stock.
Cyberattacks are growing in frequency because of AI
Advanced tools like generative AI are being weaponized by malicious actors to rapidly create realistic content designed to fool employees in large organizations into handing over sensitive information. For example, Palo Alto Networks says phishing emails increased tenfold in the last 12 months alone, solely because of AI.
Employees are the most vulnerable part of any company because of their constant interactions with the outside world through email, phone, and messaging platforms. CrowdStrike says 90% of successful cyberattacks originate at the endpoint — meaning the computer or device those workers are using to complete their day-to-day activities.
Automated cyber protection is key because it’s unrealistic to expect every employee to become a security expert, and that’s why CrowdStrike’s AI approach is so powerful. Its models are trained on mountains of data, including 2 trillion security events every day. CrowdStrike also makes over 180 million indicator-of-attack decisions every second to determine the intent of malicious actors. Processing that much volume simply wouldn’t be possible without AI.
CrowdStrike’s flagship Falcon platform isn’t just an endpoint product. It includes cloud security, identity security, and exposure management (among other modules), to give businesses a holistic solution. That allows them to consolidate their cybersecurity spending to one provider, and as of the fiscal 2024 fourth quarter (ended Jan. 31), the majority of CrowdStrike customers (64%) were using at least five Falcon modules.
CrowdStrike also said the number of customers using eight modules more than doubled from a year ago, which really highlights how business’s needs are broadening.
CrowdStrike continues to grow quickly, but also profitably
CrowdStrike generated a record $3 billion in revenue during fiscal 2024 (ended Jan. 31), representing a 36% increase from fiscal 2023. The company could grow by more than 30% in fiscal 2025, too, with almost $4 billion in revenue expected at the high end of management’s guidance.
However, CrowdStrike’s profitability might be the bigger story. The company delivered $89.3 million in net income during fiscal 2024, and while that sounds like a modest number on billions of dollars in revenue, it was a positive swing from the $183.2 million net loss it generated in the prior year.
On a non-GAAP (adjusted) basis, CrowdStrike’s net income soared 104% year over year to $751.7 million. That number strips out one-off and noncash expenses like stock-based compensation to give investors a better idea of how profitable CrowdStrike’s actual business operations are.
Profitability is a point of focus for investors right now because the challenging economic environment is revealing that most technology companies are great at growing quickly, but very few of them successfully maintain strong growth when they moderate their expenditures to deliver a profit.
Why it’s not too late to buy CrowdStrike stock now
CrowdStrike stock rose more than 400% over the last five years and it’s trading near an all-time high, but the company’s long-term financial forecast suggests it’s not too late to buy into this growth story.
It ended fiscal 2024 with $3.4 billion in annual recurring revenue (ARR), which differs from actual revenue because it measures the expected future value of existing subscriptions. However, management wants to scale that number to $10 billion within the next five to seven years.
But even if CrowdStrike achieves that ARR target, it would still only represent a fraction of the company’s estimated $225 billion total addressable market for fiscal 2028.
CrowdStrike currently has a market cap of $80 billion, which places its stock at a price-to-sales (P/S) ratio of 26.2 based on its fiscal 2024 revenue. That is quite expensive compared to other cybersecurity giants; Palo Alto Networks stock trades at a P/S ratio of 13.8, for example.
But the stock market is a forward-looking machine. If management’s forecasts prove accurate over the next seven years, CrowdStrike stock might actually be a bargain at today’s price.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Palo Alto Networks. The Motley Fool has a disclosure policy.
A New Bull Market Has Begun, but It’s Not Too Late to Buy This Unstoppable Artificial Intelligence (AI) Stock was originally published by The Motley Fool
