Analysts heap praise on CrowdStrike after 2023 Investor Day

By Senad Karaahmetovic

Wall Street analysts are growing increasingly bullish on CrowdStrike (NASDAQ:CRWD) after the company held its 2023 Investor Day.

Shares recorded a period of underperformance as investors were skeptical about the management’s plans to hit $10 billion in annual recurring revenue (ARR). According to Morgan Stanley analysts, who attended yesterday’s event, the CRWD management doubled down on its long-term targets.

This is because they see a long runway of growth in its core endpoint security market while emerging products, namely Protection, LogScale, Discover, and Spotlight, are expanding the TAM opportunity.

Furthermore, the management also addressed the bear thesis on the stock and related to pressure from Microsoft (NASDAQ:MSFT). According to the management, a survey showed that when a customer actually tests the CrowdStrike solution, they choose it 8 out of 10 times over the Microsoft Windows Defender solution.

Moreover, the management set targets for an FCF margin of 30% in FY24, 30-32% in FY25, and 32%+ in FY26.

“While estimates aren't moving higher, we think today's investor briefing did a good job highlighting the conservatism in our CRWD path to $5B+ ARR and the focus eventually shifts towards $10B+ ARR once we're past the uncertain macro. At <20X EV/CY25FCF for 30% forward FCF growth, we continue to see compelling risk-reward,” analysts wrote in a client note yesterday.

Here’s what other analysts had to say about yesterday’s event:

Stifel analysts: “We believe near-term pricing pressure, a moderating customer demand environment as organizations digest COVID driven end-point purchases, as well as increasing mid-market competitive pressures from MSFT Defender, makes FY24 a transitional year, and we are somewhat concerned the company will not be able to reaccelerate ARR growth in 2H24.”

Guggenheim analysts: “CrowdStrike is one of only a few companies that continued to grow its New ARR through FY23, though it moderated throughout the year, finishing at 4% growth in F4Q23. While some investors may see the $5B+ in ending ARR in FY26 as conservative as it requires no growth in net New ARR, it’s probably not as conservative as they think if the economy continues to be challenging.”

Wells Fargo analysts: “We believe CRWD remains well-positioned to continue taking share.”

CrowdStrike shares are down 6.1% today.

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