Crowdstrike (NASDAQ:CRWD) is starting to see its shares recover this week after a 6-week dip that shaved 11% off their value. CRWD stock had been on a roll since March 2020. With the pandemic adding momentum to trends like remote work, remote learning, video streaming and online shopping, many companies have been investing in cyber security measures.
That has been good news for CrowdStrike and its Falcon enterprise security systems. It has also made shareholders happy.
When it closed at $282.31 on Aug. 27, CRWD stock had posted a 15-month gain of 614%.
If you’ve been on the fence about CRWD and waiting to see if it would fall further, now might be the time to make a move.
A Big Second Quarter, But Not Everyone Is Happy
On Aug. 31, CrowdStrike reported its second-quarter fiscal 2022 earnings results. It was a record-setting quarter for the company. Total revenue of $337.7 million was up 70% year-over-year. ARR (Annual Recurring Revenue) also increased 70% YoY.
The company added 1,660 net new subscriptions customers, bringing its total to 13,080. That’s 81% YoY growth. Earnings-per-share of 11 cents beat estimates and easily topped the 3 cents from a year ago.
However, despite the big quarter CRWD stock closed down the next day, beginning its slide. On Monday, it was reported that Goldman Sachs analyst Brian Essex had downgraded CRWD to “Neutral” while keeping his $305 price target.
Ransomware Is Becoming Big Business
To understand why CrowdStrike’s Falcon security products are in such high demand — and why that demand is only going to increase in the future — just look at the trajectory of ransomware.
The first known ransomware attack occurred in 1989. That one arrived on a floppy disk and targeted a hospital with a $189 demand. Ransomware remained a minor threat until the arrival of cryptocurrencies like Bitcoin (CCC:BTC-USD) that offered an anonymous payment method. The internet and cryptocurrency kickstarted massive growth in ransomware attacks.
It’s estimated that in 2019, there were 184 million ransomware attacks, with hospitals still being a favorite target. The payouts are considerably higher as well. It’s reported that a single cybersecurity insurance company in the U.S. has been paying $1 million daily to criminal gangs to unlock clients’ computers.
This year, there have been multiple high-profile ransomware attacks, including one that shut down a major U.S. East Coast pipeline, and another that shut down 25% of U.S. beef production. Projections have global damage costs for ransomware attacks to hit $20 billion by the end of 2021. That would be a 57-fold increase since 2015. Wouldn’t you like to see those kind of returns?
Boston University computer science associate professor Sharon Goldberg explains that ransomware “is basically an industry, and there’s a business model that’s working.”
That’s just ransomware. Companies and organizations face a wide range of cybersecurity threats.
Given the stakes, the success cybercriminals are having, and the growth trajectory of ransomware, CrowdStrike and its Falcon security products have a rosy future. And that bodes well for the long-term growth of CRWD stock.
Bottom Line on CRWD Stock
Goldman Sachs’ Brian Essex may have downgraded his rating for CRWD stock, but most analysts have a more optimistic view. Of the 24 investment analysts polled by The Wall Street Journal, 19 have CRWD rated as a “Buy.” Their average 12-month price target of $311.83 offers nearly 20% upside.
That’s not quite the same degree of growth that the ransomeware “industry” is experiencing, but I don’t know many investors who would complain about a 20% return. Thanks to the explosive growth in ransomware attacks and other cybersecurity threats, the long-term growth prospects for CRWD stock also look good.
On the date of publication, Louis Navellier had a long position in CRWD. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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