Crowdstrike: The Right Niche for Our Time

• Crowdstrike is only halfway back to its November high
• Revenue beat estimates in the latest quarter
• Cybersecurity remains a hot niche

Crowdstrike Holdings (NASDAQ:CRWD) stock has been rising since the start of the Russia’s invasion on Ukraine.

Shares opened Mar. 28 at $220.15 each. They were bouncing around $160 before the war started. That gives the company a market capitalization of $51.23 billion on 2021 sales of $1.5 billion. Crowdstrike has yet to book a full year profit.

While technology growth stocks have fallen out of favor, cybersecurity remains a prized niche. Investors are ignoring Crowdstrike’s losses of $42 million, or 18 cents per share in the last quarter alone. Instead, they’re focusing on revenue growth of 65% year-over-year.  They’re also buying cybersecurity stocks, like Crowdstrike, for national defense.

The Right Niche

Crowdstrike is known for Falcon, a cybersecurity suite that includes protection for client devices and proactive response services. That means its software not only fights threats at the network edge, but collects data to go after the bad guys.

Crowdstrike management believes its products target one-third of the total cybersecurity market, a market that is forecasted to grow to $366.1 billion by 2028. Crowdstrike’s competitors include Palo Alto Networks (NASDAQ:PANW), SentinelOne (NYSE:S) and Fortinet (NASDAQ:FTNT).

Cybersecurity is a niche that changes rapidly, often without notice. One former Crowdstrike competitor was Kaspersky Labs, a Russian company whose software was quickly ripped out once the war started. It is also a niche where constant investment is needed and where workers are very highly paid. That is why Crowdstrike has yet to see much net income.

The cloud is just one big change in the market. Crowdstrike has recently become recognized by analysts at Forrester for its performance in cloud workload security.

Shields Up

The war in Ukraine is creating opportunities, as well as costs.

In reaction to a “shields up” advisory the Department of Homeland Security issued at the start of the war, Crowdstrike began offering free services to critical infrastructure, along with Cloudflare (NYSE:NET) and Ping Identity (NYSE:PING). The project hopes to build a roadmap for securing public systems.

Cybersecurity’s status as a war zone was enhanced by a recent Canadian report calling China the biggest threat, with hackers tied directly to the country’s army.

Crowdstrike’s growth and niche have made it a favorite at Tipranks, despite continuing losses. All but one of 22 analysts have it on their buy lists. The price target is about $270 per share, up over 20% from where it trades now.

I wrote favorably about Crowdstrike in October, when the stock’s price was 10% ahead of where it is now. This illustrates a hazard in all growth stocks, including those in cybersecurity. They are all volatile, often rising and falling with investor fashions rather than on business fundamentals.

The current business fundamentals at Crowdstrike are strong. They’re strong enough to take accounts away from Microsoft (NASDAQ:MSFT). Analysts consider them strong enough not to worry about Alphabet (NASDAQ:GOOGL) buying competitor Mandiant (NASDAQ:MNDT).

The Bottom Line on CRWD Stock

Owning Crowdstrike stock is not for the squeamish.

Since the company came public in July 2019, shares are up 245%. But they have also been subject to sickening falls, losing over 40% of their value in the most recent tech wreck.

Investors should time their buying for those falls, nibbling on it when others panic. You also need to pay attention to headlines because the market can turn on a dime. So far, rapid change has only aided Crowdstrike and its shareholders. But that may not always be the case. Knowing why a stock is falling can save your investment.

On the date of publication, Dana Blankenhorn held long positions in GOOGL and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.