Artificial intelligence (AI) could pave the way for dramatic increases in productivity and even help treat life-threatening diseases. This amazing technology movement is just beginning to impact the world.
At the same time, AI can be used by bad actors to carry out cyber-attacks, which can be highly destabilizing. The scale and capabilities of these AI-powered cyberattacks will continue to evolve. Thankfully, top cybersecurity companies have scale and resource advantages that can help them combat the growing threat landscape. And the growing importance of thwarting such threats suggests that investors have a chance to win big over the long term.
Looking for stocks that can capitalize on the burgeoning AI and cybersecurity trends? cloud strike (NASDAQ: CRWD) Seems like a great stock to consider right now.
CrowdStrike is a significant leader in the AI category
CrowdStrike’s core service is to provide software that prevents hardware devices from being used in network attacks. The company’s cloud-based Falcon platform uses AI and machine learning technology to defend against threats and adapt to new forms of attacks. Falcon offers best-in-class protection, and demand for its capabilities is surging.
Not only are cybersecurity professionals continuing to attract new clients, but spending from existing clients is also increasing. Currently, 63% of his customers are using more than 5 of his 20+ modules in the company. Meanwhile, 42% of customers use at least 6 modules and 26% of the customer base uses at least 7 modules.
For comparison, at the end of last year’s third quarter, 60% of customers were using at least five modules, 36% were using at least six modules, and 21% were using at least seven modules. I was there. The growing spending by Falcon customers suggests that the platform offers high performance and value.
Thanks to customer additions and strong net revenue retention, CrowdStrike’s third quarter revenue increased 35% year-over-year to $786 million. meanwhile, Non-GAAP (Adjusted) net income more than doubled to $199.2 million.
But while CrowdStrike is driving efficiency efforts to improve its bottom line, it’s not skimping on research and development (R&D) spending. The company’s research and development spending increased 38% annually to $410 million over the past three reported quarters.
CrowdStrike continues to invest significantly to drive initiatives that can generate long-term growth and strengthen our competitive position in the cybersecurity space.
CrowdStrike stock appears attractively valued.
CrowdStrike generated free cash flow of $655 million in the first three quarters of the current fiscal year, an increase of 40% year over year. The company’s free cash flow generation over the period accounts for approximately 30% of its revenue over the period, which is a very impressive performance.
Even better, we think the company has room to continue expanding its margins over the long term. Company management believes that over time, CrowdStrike can continue to regularly achieve subscription gross margins of 82% to 85%. Meanwhile, the company expects operating margin to reach 28% to 32% and free cash flow margin to reach 34% to 38%.
CrowdStrike’s value looks attractive even though the stock trades at 93 times this year’s expected earnings. The business has experienced impressive growth, and the combination of superior profit margins and a favorable long-term demand outlook suggests this stock could continue to deliver returns for long-term investors.
The need for high-performance cybersecurity services will only continue to grow. CrowdStrike holds a leadership position in its AI-enhanced protection space, and the company is well-positioned to benefit as demand continues to grow and industry consolidation trends concentrate sales among the top players in the space.
For long-term investors looking to capitalize on the intersection of strong AI and cybersecurity demand tailwinds, CrowdStrike stock has the makings of a big long-term winner.
Should you invest $1,000 in CrowdStrike now?
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keith noonan I have a position in CrowdStrike. The Motley Fool has a position in and recommends CrowdStrike. The Motley Fool has Disclosure policy.
1 Artificial intelligence (AI) growth stocks to buy in 2024 Originally published by The Motley Fool