Crowdstrike had a great run in 2020 and into 2021.
Much of the decline is due to interest rate increases.
What is the long-term potential for the company?
CrowdStrike went public at $34 in June. Crowdstrike shares closed Thursday at $161.28, so there is no immediate risk of the company sinking beneath its IPO price. In a bull market, companies that IPO'd in the past 10 to 15 years are very much in the running for large price gains.
When it comes to other cybersecurity names, it has a market cap of $37.64 billion.
It is true that cybersecurity isn't likely to shrink anytime soon, but it is also true that tech will suffer when interest rates go up. Tech and other growth companies tend to invest profits back into high potential projects rather than return money to shareholders in the form of dividends. Growth prospects can be affected by higher rates. Tech stocks often have high price-to- earnings ratios.
Crowdstrike has long-term debt. Techs often use leverage to finance growth. Increased costs of borrowing can cause a damper on growth. The stock fell more than 5% this week after the Federal Reserve raised its rate.
Good news for the company has been reported. The earnings for the second quarter of fiscal 2023 came in at $0.36 per share on revenue of $555 million. Crowdstrike has beat revenue views every quarter since it went public. Since it became a public company, it has topped earnings views in every quarter.
In the past eight quarters, revenue has grown at double-digit rates while earnings have grown at triple-digit rates.
The company raised its guidance. Analysts had expected earnings per share to be between $0.28 and $0.29.
Revenue was guided between $569.10 million and $575.90 million. That would be an increase over the year- earlier quarter.
Crowdstrike expects its earnings to double for the full year.
Crowdstrike has some competition when it comes to pricing.
The small cap that develops and sells software to manage and secure devices, apps, data, and networks for enterprise customers is up 36.19% in the past three months and 17.40% year to date.
The company went public in October. It is not an institutional quality stock with a market cap of $550.9 million. Larger companies tend to be more stable and have more analyst coverage than smaller companies.
Small companies from all industries can become price leaders. Being new and having an Agile management team is one of the factors.
Intrusion is an example of that phenomenon. So far this year, the stock is up 30.81%. It is not an institutional quality stock with a market cap of just $82 million.
Unless you are specifically looking for small-cap exposure, you will generally find more stable opportunities among the larger names within an industry.