CrowdStrike Earnings: Endpoint Security Leader Puts Out Strong Results Ahead of Our Estimates
We lift our fair value estimate for narrow-moat CrowdStrike CRWD to $163 from $156 after the firm reported strong financial results and guidance ahead of our prior estimates. While general turbulence continued to affect the firm’s near-term financials, we believe CrowdStrike’s growing addressable market, sticky products, and wide range of solutions are all positive indicators for the firm’s long-term potential. We believe in a cybersecurity landscape in which nefarious actors are increasingly leveraging artificial intelligence/machine learning tools to exploit security vulnerabilities in organizations, CrowdStrike’s Falcon platform is well-positioned to capitalize on increased demand for cybersecurity solutions. We believe investors were disappointed with some forward-looking metrics leading to a sharp selloff in CrowdStrike’s shares afterhours. We believe this selloff has created upside for investors looking to get high-quality SaaS/cybersecurity exposure.
First-quarter sales clocked in at $693 million, up 42% year over year. Annual recurring revenue also expanded 42% year over year to $2.73 billion. Net new ARR, a measure of new business CrowdStrike landed in the quarter, came in at $172 million, down 22% from an exceptionally strong fourth quarter. We attribute this slowdown in net new ARR to macro-induced IT spend optimization, a challenge faced by IT vendors across our coverage.
We believe investors were left underwhelmed by CrowdStrike’s forward-looking metrics’ growth rates. Remaining performance obligations expanded 41% year over year, down from a 60% annual growth rate a year ago and a 49% annual growth rate last quarter. A similar deceleration was also present in billings and deferred revenue metrics, both of which are also forward-looking indicators. In our long-term view, we believe such quarterly fluctuations have only a minor impact on the firm’s valuation and continue to remain bullish on the firm’s prospects beyond the near-term general tightness.
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