CrowdStrike's Premium Metrics Deserve Premium Valuation, Says Bullish UBS

The bullish case for cybersecurity provider Crowdstrike Holdings Inc CRWD is based on the simple premise that the company's premium metrics deserve a premium valuation, according to UBS.

The CrowdStrike Analyst: Fatima Boolani initiated coverage of CrowdStrike with a Buy rating and $120 price target.

The CrowdStrike Thesis: CrowdStrike's advanced cloud-native and SaaS-based endpoint and workload security platform positions it to take advantage of secular trends, including work from home, cloud adoption and IoT device growth, Bollani said in an initiation note. (See her track record here.)

The company's exposure to fast-growing segments should allow it to sustain a strong 40%-plus compounded annual revenue growth rate through 2022, the analyst said.

Part of the growth could come from the company's success in expanding to adjacent markets like vulnerability and systems management, she said. 

Beyond revenue growth, CrowdStrike should show around eight points of annual operating margin improvement through fiscal 2023 to 10%, Boolani said.

Over the same time period, gross margins should gain 100 basis points, mostly from higher unit and renewal economics, as 70% of revenue comes from the installed base, the analyst said. 

The stock is trading at 22 times EV/S on 2021 estimates and 17 times EV/S on 2022 estimates, which is a premium to established SaaS security rivals, she said. Yet given CrowdStrike's superior growth metrics, a premium valuation is not only justified, but the stock trades at a discount on a growth-adjusted basis, according to UBS. 

CRWD Price Action: Shares of CrowdStrike Holdings were trading higher by 0.44% at $101.33 at last check Friday. 

Related Links:

Remote Workers And The Thieves That Want Their Data

Recognizing And Reducing The Impact Of Auto Cyberattacks