Stock Market & Economy Recap - Sunday, June 6

A new record high for quarterly net income was set for the company as operating margins improved.

A new record high for quarterly revenues was set, as well. Q1 revenues came in +5% above expectations, for a growth rate of 84% over Q1 2020 results.

A record high revenue growth rate was illustrated as sales surged on increased demand for both gaming and data center products. The company also raised forward guidance.

Here is another great company whose stock price is already priced near perfection at 21x sales and 45x forward earnings. The surge in demand due to data mining cryptocurrency could lead to volatility if the crypto trend were to reverse, like it did in 2018. The company is executing very well in all segments, and if the ARM deal goes through (roughly a 50/50 chance right now), it would only strengthen its competitive advantages.

Cyber security company CrowdStrike (CRWD) reported another strong quarter, with adjusted EPS coming in 100% above expectations.

Revenues grew 70% year-over-year and came in about 4% above street expectations. Sequential revenue growth came in at 14%, slightly below the company’s average since IPO of 17%. The company guided for approximately 63% revenue growth (14.3% sequential growth) in the next quarter (orange bar in chart above).

Customer count grew 82%, now in the 11,420 range, with 64% of customers buying at least 4 of the company’s cloud security products.

Thus, another strong quarter for a great company whose stock price isn’t cheap. The stock has been consolidating recent gains and declined post earnings due to concerns about the slowing growth rate and rising operating costs.

CrowdStrike, Zscaler (ZS), and Fortinet (FTNT) are at top of their class in a very important industry. This doesn’t mean they will turn out to be tremendous stock performers, but I like what they are doing and I believe they have their place in a well diversified portfolio.

Charts of the Week

This week's charts illustrate the cumulative advance-decline lines for the New York Stock Exchange and the S&P 500 index. It takes the number of stocks that close higher and subtract the stocks that close lower on a daily cumulative basis. These are my favorite technical indicators that show the level of participation under the surface.

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Disclosure: I own shares of CrowdStrike, Zscale, and Fortinet. I/B/E/S data is from Refinitiv.

Disclaimer: None.

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