Home > Should you buy CrowdStrike ahead of the Q3 FY2022 earnings call?

Should you buy CrowdStrike ahead of the Q3 FY2022 earnings call?

CrowdStrike (NASDAQ:CRWD) is about to release its quarterly earnings this week. The market expects EPS higher by 23.04% when compared to the same period last year. 

CrowdStrike is an American IT company from Sunnyvale, California. It provides cloud solutions locally and internationally, and it was founded in 2011.

The company reports its Q3 FY2022 financial results tomorrow, December 1, at 02:00 PM PST. The market expects higher EPS by 23.04% YoY, or $0.10 on the quarter and CrowdStrike had reported better than expected EPS in the past four consecutive quarters. Given the popularity of cloud services among individuals and businesses, the chances are that it will beat expectations this quarter.

While not paying a dividend, CrowdStrike compensates with an impressive gross profit margin – 73.88%, higher by 49.04% than the sector median. In addition, the stock price is up 48% in the last twelve months, and the annual revenue estimate for 2021 is $860 million, forecasted to rise by almost five times by 2026.

If the projected revenue growth is impressive, so does the projected EPS, expected to rose by more than 13x over the same period.

What do analysts say about the CrowdStrike stock price?

Analysts are bullish on the stock price. Out of the 72 analysts covering the company, only one has issued a sell rating. In contrast, 59 analysts have a buy rating, and the rest a neutral rating.

Most recently, Mizuho has maintained its buy rating with a price target for CrowdStrike’s stock of $360. Moreover, UBS maintained its buy rating too, this time with a price target of $325. On the flip side, Goldman Sachs downgraded the stock to hold, with a price target of $305.

The problem with these new companies in promising sectors, like CrowdStrike, is that they trade at huge valuations, as reflected above by the P/E ratio. However, they grow at such impressive rates that investors are still willing to pay a hefty price only to be part of a sector or industry with upside potential.

All in all, CrowdStrike may look expensive here, but the stock price consolidated for most of 2021. Both revenues and EPS are projected to increase at a fast pace – much higher than the sector median, thus justifying partly the high valuation.

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