Why CrowdStrike (CRWD) Stock Is Trading Up Today
What Happened:
Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) jumped 25.2% in the pre-market session after the company reported fourth-quarter results with revenue and ARR (annual recurring revenue) beating by a slight margin but very convincingly on operating profit. Keeping with that theme, while forward guidance for the next quarter and the full year were only slightly above expectations, non-GAAP EPS guidance was more convincingly ahead, showing better-than-expected profitability.
Lastly, Palo Alto Networks (NASDAQ:PANW) warned of weakness in security spending a few weeks ago when it reported earnings, sending waves of caution across the sector. Cybersecurity peers that reported after Palo Alto put up mixed results, which kept investors on edge for CrowdStrike's results.
These results could signal a shift in sentiment given CrowdStrike's popularity within the cyber security space, especially considering its cloud security capabilities.
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What is the market telling us:
CrowdStrike's shares are quite volatile and over the last year have had 17 moves greater than 5%. But moves this big are very rare even for CrowdStrike and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was about 22 hours ago, when the company dropped 6.8% as stocks declined, with investors likely taking profits. The Nasdaq fell 1.6%, while the S&P 500 was down 0.9%. Some of the big tech names felt the heat, with Tesla, Netflix, and Microsoft all declining by more than 2%. Notably, iPhone manufacturer Apple was also down nearly 3% following a research report by Counterpoint that suggested a decline in iPhone sales in China in the first six weeks of the year. The weak demand report could signal that the purchasing power of consumers in the region is weakening. Otherwise, we have found no other fundamental or rate-related reasons explaining the broad market decline. It is a week packed with information for investors to digest.
Fed Chair Jerome Powell will give updates to Congress on March 6th and 7th, 2024, about the current monetary outlook, recent policy actions, and progress toward bringing inflation back down. Finally, on March 8th, the Bureau of Labor Statistics will report nonfarm payrolls for the month of February. The insight gleaned from the economic data and updates during the week could inform the market's outlook on equities and other assets for better or worse. Investors expect the Fed to begin cutting rates this year, with the expectation of the first rate cut as early as the first half of the year.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
CrowdStrike is up 38% since the beginning of the year. Investors who bought $1,000 worth of CrowdStrike's shares at the IPO in June 2019 would now be looking at an investment worth $5,876.
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