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CrowdStrike’s Stock Price Just Exploded. Time to Buy?

Cybersecurity has become a high priority for many companies. Breaches, ransomware attacks, and other digital incidents are costing businesses billions of dollars in remediation, downtime, legal fees, and other expenses. Endpoints (any devices like laptops, desktops, and servers that are connected to networks) are particularly vulnerable. IBM reports that 90% of attacks utilize endpoint vulnerabilities. In response, organizations are turning to cloud-based cybersecurity platforms like CrowdStrike‘s (CRWD -1.18%) Falcon for comprehensive protection. CrowdStrike’s stock has surged as a result.

CRWD data by YCharts

There’s a ton to like about CrowdStrike

CrowdStrike offers its security services via a subscription model, so its revenue is annually recurring when customers renew their protection. This makes annual recurring revenue (ARR) a critical metric for the business. CrowdStrike has grown its ARR prolifically in recent years, reaching $3.65 billion in the first quarter of its fiscal 2025 — 33% growth from the prior year period.

The Falcon platform is modular, so customers can add features as needed. This gives CrowdStrike the ability to “land and expand” — in other words, sign new customers to more basic contracts and then sell them additional modules later. Currently, 65% of its customers use at least five modules, and the number of eight-module deals rose by 95% year over year in the fiscal first quarter (which ended April 30). This helped to push total revenue for the quarter to $921 million.

Another reason I like CrowdStrike’s business is its ability to produce free cash flow (FCF). In fiscal Q1 2025, it posted FCF of $322 million, and has grown this metric steadily throughout its history as a public company. Its FCF margin was 35%.

CRWD Free Cash Flow data by YCharts.

While producing more than $1 billion in free cash flow over the last 12 months, CrowdStrike steadily increased its cash balance from $2.8 billion at the end of the prior-year period to $3.7 billion at the end of its most recently reported quarter. This puts the company in a strong position to fund growth efforts and make strategic acquisitions if management chooses.

CrowdStrike is entrenched with large Fortune 500 customers and is now focusing on growing its footprint in the small and medium-sized business (SMB) market as well. The company estimates its total addressable market at $100 billion and climbing, so its runway for growth is still long. Thus far, CrowdStrike’s execution has been terrific.

Is CrowdStrike stock a buy?

CrowdStrike’s market cap has ballooned to over $90 billion, which is a bit high for a company with $3.3 billion in revenue over the past 12 months. Its price-to-sales (P/S) ratio of more than 28 is higher than other high-growth, subscription-based tech companies such as Palantir.

CRWD PS Ratio data by YCharts.

However, it is still slightly below CrowdStrike’s historical average of 30, and its forward P/S ratio is just 23. Because of its relatively short history as a public company — which has included the pandemic, the 2021 tech bubble, and the subsequent 2022 swoon — gauging its valuation is complicated.

For this reason, long-term investors who want to open a position in CrowdStrike right now should consider building it gradually via dollar-cost averaging or waiting to buy in on dips. These strategies can help to mitigate risk. CrowdStrike’s fantastic results make it an attractive company to own in the long term. However, be cautious about investing at the current stock price.

This post appeared first on fool.com

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