CrowdStrike: Powerful Business Model And Strong Execution

CrowdStrike (CRWD) is a growth leader in cybersecurity; the company has a great business model, outstanding execution, and abundant room for further growth in the years ahead. The stock is priced for aggressive expectations, and this can be a source of volatility if there is any disappointment down the road. That being acknowledged, the upside potential is clearly attractive for long-term investors in CrowdStrike's stock.

A Powerful Business Model

CrowdStrike has a disruptive business model in endpoint security. The company's cloud-native Falcon platform uses Artificial Intelligence to learn from the data it collects, permanently improving the effectiveness of the platform to provide the best solutions in an always changing cybersecurity environment.

When a client gets attacked, the company gathers information from that attack and learns from it, generating better solutions for all of CrowdStrike clients based on one single event experienced by one client.

In a sense, CrowdStrike and its clients are benefiting from the network effect, which means that the value of the platform increases as it grows in size. The more users CrowdStrke has, the more information it collects from those users, which makes the platform more effective for all of the users. This creates a self-sustaining virtuous cycle of consistent growth and enlarged competitive strength for CrowdStrike over time.

Besides, a cloud-native platform such as Falcon is much more easily scalable and easy to implement, which is a crucial advantage in times of work from home and expanding needs for endpoint protection in cybersecurity.

From a financial perspective, the business model should scale very well, too. Most of the costs of providing the service are relatively fixed in comparison to revenue, so profit margins can be expected to expand as revenue grows over the years. Vigorous revenue growth in combination with a larger share of revenue being retained as profits should provide a double boost to earnings over the years.

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Disclosure: I am/we are long CRWD.

Disclaimer: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with ...

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William K. 4 weeks ago Member's comment

Quite a bit of information and insight in this article. And useful information. Certainly a worthwhile reading.