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The search for the best stocks to buy now is endless. There are always new opportunities to explore and profitable deals to be had. The challenge is figuring out which companies will continue to deliver market-beating returns. And in my experience, it’s often an unpopular business in an important industry.
The cybersecurity market has exploded in recent years. As threats become more complex and data more valuable, companies have begun to protect their IT infrastructure more. And according to Polaris Market Research, the global cybersecurity market is on track to double to over half a billion dollars by 2030.
That’s what was delivered CrowdStrike (NASDAQ:CRWD) to my attention. An IT outage caused by a botched software update earlier this year put CrowdStrike on the blacklist of many investors. However, in my view, the subsequent sell-off is likely to create a discounted buying opportunity for long-term investors. Let’s take a closer look.
An online solution powered by AI
In the world of enterprise cybersecurity, CrowdStrike is currently the world leader. Its technology is expensive but companies all over the world are more than happy to pay. This is partly because the cost of registration for the Falcon platform is much lower than that of a security breach. But it is mainly because Falcon keeps solutions that work well for competitors.
The technology uses artificial intelligence (AI) to detect and protect against cyber attacks with surprising efficiency. And the platform’s capabilities are continuously demonstrated in global cyber competitions. In fact, at the recent SC Awards Europe – the longest-running annual cybersecurity event – CrowdStrike won:
- The Best Cloud Security Solution
- The best Endpoint solution
- Best AI solution
- The Best Threat Intelligence Technology
- Best Incident Resolution Categories
This is not the first time CrowdStrike has demonstrated the effectiveness of its technology. And while the latest IT outage event started to raise eyebrows, the fault ultimately had nothing to do with its cyber security capabilities. Of late, there seems to have been little customer churn, except that Delta Airlineswho cut the lawyer up.
Performance-based measurement
After the end of IT, CrowdStrike’s shares halved. And such volatility is to be expected, as the stock has been trading at a very high price. Today, US stocks have recovered slightly but are still trading about 25% lower. Yet even at this price point, the stock doesn’t look cheap in the traditional sense, with a forward price-to-earnings ratio of 72.5!
Needless to say, that doesn’t exactly mean screaming. But with less context, the equation starts to make more sense. Management has outlined its long-term goal of increasing its operating profit margin to 28-32%, with free cash flow to follow at 34-38%.
Considering that the company is only just starting to get into the black, that suggests that big earnings growth may be on the way. Even more so if the predictions of expansion surrounding the cyber security industry prove to be accurate.
Of course, success is by no means guaranteed. And even if CrowdStrike’s technology currently holds the crown, a rival solution with cheaper prices could come along and shake things up.
It goes without saying that investing in CrowdStrike today comes with a lot of risk. But in my opinion, the growth of this business makes it a risk worth taking. That’s why I plan to open a small position this month.
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