CrowdStrike Holdings is a recent addition to my portfolio, and for a good reason. One needs to look at the technological evolution we are going through now due to COVID. Imagine contemplating that many jobs moved from the office to working from home at the start of 2020. As companies needed to adjust to this new work style, serious upgrades ensured their safety, including their information and how staff work from home.
Instead of focusing on financials and percentages, I will highlight the competition, the current working environment, and the future. This shows why $CRWD is one to consider adding to your portfolio. Please note that I hold positions of CRWD in my eToro portfolio.
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Who is CrowdStrike and why should I care?
$CRWD are a cybersecurity group led by its threat-monitoring Falcon platform. Why is that good? Well, they focus on endpoint connections to the internet. This allows them to detect attacks before they strike critical IT infrastructure. Falcon can then warn its entire client base to help defend against similar attacks. Falcon is one of the leading cyberattack prevention products on the market today. It combines machine learning, artificial intelligence, and behavioural analytics. This, with its proactive threat hunting, makes it a formidable prevention tool.
As the trend continues for companies to move towards digital resourcing, the market available to CrowdStrike grows every day. Think about the companies you work for and how they have changed since the start of COVID. This trend will not retract as the lure of digital technology becomes cheaper. So, when comparing on-premises data storage and cybersecurity prevention, it’s a safe bet. The increase in market share will increase revenue/cash flow for this company.
Time to (Crowd)Strike
Symantec’s enterprise division got taken over by Broadcom last year (with the remaining consumer security outfit moving on as NortonLifeLock). There were large swaths of the enterprise security market vacated. This left the door open for CrowdStrike to pick up new customers.
How are they going to do this? Well, this sudden onset of changes in remote working forced companies to rethink their infrastructure and security levels. Whilst embracing this new technology has been a blessing in disguise, it has exposed many flaws in companies. Especially to the threats to the collection and storage of data. As technology has changed, so has the complexity of IT infrastructure costs. There is more value for money in delegating these activities to other businesses in some cases. Data protection is vital for many companies as we move more and more online. Your digital footprint is worth significant money and is very appealing to those who want to do nefarious things to it.
One step ahead
As we have embraced these digital changes, so have cybercriminals. Technology adapts and changes, and so do their criminal activities. Getting ahead and staying ahead is how $CRWD attracts and retains its clientele. $CRWD has put the power of positive network effects on its side. By helping its entire base of enterprise clients collaborate about the attacks they have faced, CrowdStrike’s Falcon platform learns from experience. It immediately puts that knowledge to detect threats and anticipate the next attack. This is the AI I mentioned above. A key element to making CRWD stand out from its competitors and stay one step ahead of criminals.
Exposing an opportunity
When looking at the environment of cybersecurity measures, CrowdStrike saw that most companies only leveraged on-premises-only cybersecurity measures. That is fine, but we are no longer a dedicated on-premises workforce. Think about how work has changed to working from home. People access work information from their laptops or home computers, mobile phones, or company applications. Falcon was designed with the cloud in mind.
To do so, CrowdStrike identifies the most vulnerable spots for its clients. Their respective customers and employees must be on their guard. The places where critical information meets the broader internet. These need the most protection. That is where Falcon concentrates its attention on detecting attacks. It is also where its revolutionary Threat Graph breach prevention engine shines because in defending one client, CrowdStrike gets valuable insight into how to protect all its clients.
When others have fallen behind, it is not recognising the need for a cloud-first security platform. Many original players have focused on traditional firewalls and antivirus software, but they have become ineffective. original companies have too much invested in their past business models to make a quick change to address the evolving threats to cloud assets. Allowing $CRWD to waltz through and establish a name for themselves.
Leaders lead from the front.
George Kurtz has been the co-founder, President and Chief Executive Officer of CrowdStrike since January 2012 and serves as its Treasurer, Secretary and Director. I admit I am concerned that one person holds so many hats. Still, as the company grows, these roles will be transitioned to other resources so that the dedicated team specialise in their respective areas. Kurtz has a solid business acumen history – you tell me if he has the battle scars to know what he is talking about
- Manager at PricewaterhouseCoopers, where he was responsible for growing their Internet security practice.
- Manager at Ernst & Young, he had revenue-generating responsibilities for the entire U.S. Theatre of Operations specific to security assessment services.
- Senior Manager and the National Leader of Ernst & Young’s Security Profiling Services Group.
- Co-founded Foundstone, Inc. in 1999 and served as its Director.
- Chief Executive Officer at Foundstone, where he was responsible for consummating several international strategic partnerships.
- He began his career at McAfee after McAfee bought out Foundstone in 2004.
- Senior Vice President, Risk Management of McAfee Inc.
- General Manager of Risk and Compliance Business Unit at McAfee
- Worldwide Chief Technology Officer and Executive Vice President at McAfee
- He left McAfee in October 2011 to start CrowdStrike with fellow co-founder Dmitri Alperovitch
Why (Crowd)strike Now?
Its fast-growing client base includes some of the top companies globally, and those clients tend to spend more and more for CrowdStrike’s protection as they stick with the platform.
The COVID-19 pandemic has changed the landscape for enterprise tech, and CrowdStrike is jumping at the chance to extend its reach and appeal to a growing set of new customers. It opened special terms to some of its customers and businesses in industries such as airlines and hospitality that the crisis hit hardest. CrowdStrike has worked closely with clients to help them deal with the rapid rise of remote work, which created challenging situations for companies that had not before dealt with the heightened dangers inherent in allowing remote access to critical work functions.
Unfortunately, the pandemic has also raised the overall threat level for cyberattacks. As one customer told Kurtz,
“Our adversaries will be more motivated than ever to harm us now when they think we may not be paying attention.” Yet that is also an opportunity for CrowdStrike, which the same customer said has become “the linchpin of our security program.”
Potential Business Risks
With that growth opportunity, however, comes financial risk. CrowdStrike is losing money, and promotional efforts to boost sales growth will likely push back the timeline on the company eventually reaching profitability. I am happy with comfortable with short-term losses if they lead to greater long-term profits, but we will be watching spending closely to make sure CrowdStrike is doing it smartly. Also, having no debt does marvellous things for a company’s financial metrics.
What do the bulls say about CrowdStrike?
The bulls say that CrowdStrike’s products have become more capable as the company adds more clients. And the company’s threat intelligence and hunting features can become a major part of the cybercrime defence for their customers. Plus, CrowdStrike’s endpoint security solutions delivered as a platform have been quickly attracting customers as clients are looking to consolidate their legacy security. Upon landing a client, CrowdStrike can also up-sell more security tools.
What is the case For the Bears?
The bears are saying that changing vendors in endpoint security can be less painful than other aspects of security, and CrowdStrike’s rivals could aggressively price similar tools. And margin expansion could be inhibited if CrowdStrike continually requires steep marketing and development costs. Plus, larger firms have been setting up endpoint security in their portfolios of products. So sometimes it is better the devil, you know.
My thoughts on CrowdStrike
I am fortunate enough to work as a consultant for the Australian Government, and I get to experience firsthand how technology is shaping the Australian Public Service. Over the last few years, there has been a massive push toward cloud technology. A few years back; there were no certified players in the cloud storage area for Government Departments. Not even Microsoft or Amazon. Fast forward to today, and it is a minimum requirement to have certification due to the sensitivity of the data stored by the Government.
As the push continues toward cloud products, companies like CrowdStrike will become a significant asset. The final icing on the cake is the shift to working from home, where hundreds upon thousands of employees shifted to remote working. These factors are massive contributors to why I added CrowdStrike to my portfolio and plan to hold on to them for a long time.
