Should You Buy CrowdStrike Before September 16th?

CrowdStrike (CRWD -1.11%) has climbed higher in recent years as companies have rushed to jump on its leading Falcon cybersecurity platform. But the company has hit a bumpy road lately, after a botched software update in July led to the world’s largest information technology outage. The event could cost Fortune 500 companies $5.4 billion, according to insurer Parametrix.

Although CrowdStrike released a fix in just over an hour, experts estimate it could take months for some customers to fully recover. However, in its latest earnings report, Crowdstrike said that overall customers chose to stay with the company, most previously arranged deals remain ongoing and the company even signed major new contracts.

Additionally, CrowdStrike is gearing up for an event starting on September 16th that could lead to additional sales. Should you buy the stock before then?

Image source: Getty Images.

CrowdStrike’s Falcon System

First, here’s some background on CrowdStrike’s business. The company offers a wide range of cybersecurity features in the form of modules — 28 of them — and they all connect to a single lightweight Falcon system. A customer can choose just a few modules or go all-in for a complete package. Falcon is built in the cloud and uses artificial intelligence (AI) to collect data from an enterprise to scan for security threats.

Customers have flocked to CrowdStrike, helping the company’s key financial metrics grow over the past five years.

CRWD Net Income (Annual) Data by YCharts.

In the most recent quarter, annual recurring revenue grew 32% to over $3.8 billion, and GAAP net income grew 5x year-over-year. The company also reported record operating cash flow and record free cash flow. Importantly, CrowdStrike said the July outage delayed the closing of new deals, but most of those new deals remain ongoing and will close in the coming quarters.

Let’s consider what will happen on September 16. CrowdStrike is holding fal.con, its annual customer and industry conference, September 16-19. This year’s event includes the participation of more than 5,000 security directors and 95 sponsors. Here’s the most interesting point: CrowdStrike says fal.con is “the biggest sales event of the year.”

A key moment for CrowdStrike

Given the recent outage, this could be a particularly key moment for CrowdStrike this year. That’s because it will give the company an opportunity to talk face-to-face with potential customers and explain what it’s doing now to prevent similar problems in the future — and convince them that CrowdStrike should still be the best choice.

The company could be successful because it was aggressive in addressing the problem. In its most recent earnings report, CrowdStrike said it had already implemented changes to improve content visibility and control and launched an external review process.

The event will also include an investor briefing on September 18. CrowdStrike says “conversations with customers and partners” will be part of it.

Even though fal.con continues to be CrowdStrike’s biggest selling event this time around, the results aren’t instantaneous. It takes months for deals to take shape and eventually close. And the fourth fiscal quarter is generally CrowdStrike’s best quarter when it comes to deals. The company is now in its third fiscal quarter.

A look at the assessment

Now back to our question: Should you buy CrowdStrike stock before fal.con starts?

I don’t expect the event itself to cause a spike in CrowdStrike stock — as I mentioned, new deals and revenue won’t come in overnight. But I think CrowdStrike makes a great buy right now for a few reasons.

First, in its recent earnings report, the company showed its resilience, and it’s clear that most of its customers haven’t abandoned ship. Second, while the stock isn’t cheap, its valuation is much lower than it was a few months ago. Today, the stock trades for 71 times forward earnings estimates, compared with more than 100 times before the July break.

Finally, the fal.con event will provide CrowdStrike with an opportunity to further communicate with investors and customers. This should work to his advantage.

All of this puts CrowdStrike in position for potential long-term earnings growth, making it a great stock to buy and own right now.