How CrowdStrike is defying cybersecurity 'fatigue': Analyst
Shares of CrowdStrike (CRWD) surged on Wednesday morning after the company reported robust fourth quarter results that beat estimates on both revenue and earnings. The impressive performance has prompted KeyBanc Capital Markets Equity Research Analyst Eric Heath to raise his price target on the stock.
Despite the cybersecurity sector "entering a period of fatigue," Heath commends CrowdStrike's ability to deliver "strong results." He tells Yahoo Finance Live that the company's financial performance "refutes any concerns" investors may have regarding a potential softening in cybersecurity spending.
Heath cites numerous tailwinds propelling the cybersecurity industry forward, including an increasing volume of security breaches, growing security budgets, and "a big need for modern solutions like CrowdStrike." Additionally, Heath highlights Palo Alto (PANW) as another promising cybersecurity stock.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
BRAD SMITH: Shares of cybersecurity company CrowdStrike surging in pre-market trading, leading its peers, Palo Alto and Zscaler, higher as well. This comes after the company reported strong fourth quarter results and guidance, dispelling fears of spending fatigue in the sector.
Our next guest boosted his price target on the stock following these results. We've got Eric Heath, who is the KeyBanc Capital Markets Equity Research Analyst joining us here today. Eric, thanks so much for taking the time. First and foremost, just want to get your read here on what's propelling CrowdStrike and how they're differentiating their offering.
ERIC HEATH: Yeah, thanks for having me. CrowdStrike delivered strong results last night. And this came despite some concerns from investors, following what were some softer than expected results from peers, Zscaler last week, and also Palo Alto the week prior. And also, we got some comments from Palo Alto on the earnings call that we were entering a period of fatigue when it comes to cybersecurity spend.
And secondarily, those comments from Palo Alto also highlighted that there was a change in the go-to-market strategy to be a bit more aggressive on their pricing strategy when it comes to the core endpoint market, which is where CrowdStrike is a leader. So these results really refute any concerns that we might have that there is a softer security spending environment going on.
And really, where CrowdStrike shines in their leadership is they were really strong in the endpoint security market. They came to market with a cloud native unified platform, single-agent console that really enables them to start with endpoint security, but really brought it much further and become a platform player going forward.
SEANA SMITH: So Eric, you briefly touched on this, but I want to dig a little bit deeper here just in terms of what this means more broadly speaking for the cybersecurity landscape. How much does this then change the narrative? And in terms of the leadership that we're seeing, aside from CrowdStrike, who else do you see as the winners within the space?
ERIC HEATH: Yeah, I think these results really just show that CrowdStrike's out executing the market right now, and they are the leader in the security space. And when it comes to the broader security environment-- look, we have a positive view on security overall. We think over the medium to longer term, there's a lot of things to be excited about when it comes to security.
One, the volume and the severity of breaches just continue to increase. Second, we think security budgets continue to outpace IT budgets overall. And third, there's a lot of legacy technology out there when it comes to security. And there's a big need for modern solutions like a CrowdStrike, like a Palo Alto, like a CyberArk that people need to adopt in order to modernize their security stack.
So as I mentioned, one of the other names that we really like here is Palo Alto. They have a really broad platform. Customers want to do more with less. And they want to do that on a single platform solution like Palo Alto. And they also have one of the most broadest and comprehensive platforms out there.
And then on the smaller cap side of things, we really like CyberArk as a vendor in the identity space. We think identity is super crucial when it comes to implementing a zero trust security strategy. And the competitive environment in the identity space right now is pretty favorable. And we see CyberArk as well executing extremely strong in that market in identity.
