CrowdStrike (CRWD) Q1 Earnings: What to Expect
Cybersecurity needs and awareness has skyrocketed over the past two years, thanks to the move toward corporate digitalization and the massive shift to remote work. Among the biggest beneficiaries of this trend has been CrowdStrike (CRWD), which has become popular amid the recent surge in cyberattacks.
However, that hasn’t prevented the stock from falling during the recent correction. But is now a good time to buy? The company is set to report first quarter fiscal 2022 earnings results after the closing bell Thursday. Shares have struggled to find a floor despite the fact that it continues to produce strong results each quarter. The company’s next-generation endpoint security technology is a cloud-native platform aimed at stopping data breaches before they can inflict damage. Cybersecurity has played a critical role as more workloads move to the cloud.
That’s likely to be the case for the foreseeable future, especially as governments and corporations adopt cyber defense architectures that are software-defined and cloud-native. It’s hard to ignore CrowdStrike’s opportunity to grow market share in these key areas. Yet the stock has fallen 33% over the past six months, trailing the 11% decline in the S&P 500 index. CrowdStrike is now attractively priced at approximately 16 times forward revenue, which is the cheapest valuation it has seen in three years. The company must issue upside guidance on Thursday to demonstrate that value.
For the three months that ended April, Wall Street expects the Sunnyvale, Calif.-based company to earn 23 cents per share on revenue of $464.26 million. This compares to the year-ago quarter when earnings were 10 cents per share on revenue of $302.84 million. For the full year, ending in January, earnings are expected to rise 64% year over year to $1.10 per share, while full-year revenue of $2.15 billion would rise 48% year over year.
While valuation concerns have been raised, the company’s ability to execute has never come into question. Aside from a surge in new customer acquisitions, CrowdStrike continues to find ways to get its existing customers to add more features and functionality. This is despite the intense competition from the likes of Palo Alto Networks (PANW), Zscaler (ZS) among others. Nevertheless, the company must continue to dispel concerns that growth has slowed as a result of the massive pull-forward in demand from the pandemic.
In the fourth quarter the company not only crushed revenue and profit estimates, it also guided higher. Q4 adjusted EPS of 30 cents per share beat consensus estimates by 10 cents per share, while Q4 revenue of $431 million rose 62% year over year, surpassing Street estimates nearly $20 million. This revenue growth rates was notable as it followed the 63.5% revenue growth the company posted in Q3. Just as impressive, annual recurring revenue surged 65% surpass $1.7 billion, compared to Q3 of $1.5 billion, which should allay concerns about a slowdown.
In terms of profitability, for the second consecutive quarter, the company reported record operating cash flow and free cash flow, which now stands respectively at $575 million and $442 million for the fiscal year. The company also issued fiscal 2023 guidance that was significantly higher than analysts’ estimates, guiding for full-year revenue to grow 10% higher, while analysts were expecting a meaningful slowdown.
And with the stock down 25% over the past year, trailing the 12% decline in the S&P 500 index, this is an opportunity for the investor to add a quality company to their portfolios.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.