We came across a bullish thesis on CrowdStrike Holdings, Inc. (CRWD) on Substack by Lorenzo Bastianelli. In this article, we will summarize the bulls’ thesis on CRWD. CrowdStrike Holdings, Inc. (CRWD)’s share was trading at $353.60 as of Dec 9th. CRWD’s trailing and forward P/E were 716.96 and 84.03 respectively according to Yahoo Finance.
[Shutterstock: 380107090, scyther5]
CrowdStrike’s Q3 earnings revealed the lingering impact of the July 19 incident, which disrupted the company’s typical upward trajectory in net new ARR. Historically, CrowdStrike’s ARR consistently grows from Q1 to Q4, but this trend was upended in Q3 2024. CFO Burt Podbere cited extended sales cycles with enterprise accounts, which increased by approximately 15% year-over-year, and customer commitment packages that reduced net new ARR by $25 million. These packages, while including additional products and Flex dollars, muted upsell rates and contributed to increased contraction. Furthermore, free cash flow fell by 1.9% year-over-year, reflecting the incident’s fallout, alongside planned investments in data centers, R&D, and marketing.
These headwinds are expected to persist in Q4, with similar customer commitment packages projected to impact net new ARR and subscription revenue by an additional $30 million. Management anticipates extended sales cycles and muted upsell rates to continue into early 2025, with net new ARR growth reaccelerating only in the latter half of FY2026. The situation raises questions about potential market share losses to competitors, as SentinelOne, Fortinet, and Palo Alto all showed positive Q3 momentum. SentinelOne, for instance, achieved over 20% sequential growth in net new ARR, highlighting the competitive challenges CrowdStrike faces during its recovery.
Despite these setbacks, CrowdStrike’s customer base remains loyal. Gross retention exceeded 97% in Q3, a testament to the strength of its Falcon platform. Additionally, the company reported growing module adoption, with 20% of subscription customers now utilizing eight or more modules, driven by the success of customer commitment packages and Falcon Flex. CEO George Kurtz emphasized that customers continue to view CrowdStrike as a trusted cybersecurity platform, and these trends suggest increasing stickiness and long-term growth potential.
Looking ahead, Q4 is expected to mirror Q3’s modest performance, with management guiding for a 22% year-over-year growth rate. While challenges persist, the groundwork laid by increased module adoption and customer retention strategies supports optimism for a rebound starting in FY2026. For now, CrowdStrike remains a leader in cybersecurity, weathering a temporary storm with clear paths to recovery.
CrowdStrike Holdings, Inc. (CRWD) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 74 hedge fund portfolios held CRWD at the end of the third quarter which was 69 in the previous quarter. While we acknowledge the risk and potential of CRWD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRWD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.