What’s Behind CrowdStrike’s Recent Jump… and Why It Should Keep Climbing Dear Louis, On Monday, all eyes were on Apple Inc.’s (AAPL) WWDC conference, which it used to share updates to its wide range of products that will incorporate AI. (To learn more about what Apple unveiled during its WWDC conference, read Friday’s Market 360 here.)
However, it was CrowdStrike Holdings, Inc.’s (CRWD) 10% pop on Monday that caught my attention first. CrowdStrike is a cybersecurity company that offers real-time endpoint security, threat intelligence and cloud workload protection. It aims to protect cyberattacks on and off an enterprise’s network.
So, in today’s Market 360, I’ll explain what was behind the jump in CRWD stock… and how growth in artificial intelligence could push it even higher. And then, I’ll share where you can learn more about other stocks that are set to explode thanks to AI.
Let’s dive in. CrowdStrike to Be Added to the S&P 500 Last Friday, June 7, S&P Dow Jones Indices announced that CrowdStrike will be added to the S&P 500 on June 24 as part of the index’s quarterly rebalancing, replacing Comerica Inc. (CMA).
Once per quarter, S&P Global rebalances its indices, including the S&P 500. It looks for companies that now qualify that didn’t before (like having too small of a market cap). It also looks for changes such as acquisitions or spin-offs that could affect a company’s qualifications to stay or be added to the index.
Whenever changes are made to the S&P 500, portfolio managers have to adjust mutual funds and exchange-traded funds (ETFs) that follow the index. Stocks that are added tend to pop, while stocks that are deleted tend to fall.
This is exactly what happened with CrowdStrike.
As of this writing, the stock is now up about 23% in June, but I don’t expect its momentum to slow down anytime soon, thanks to AI… CrowdStrike Enters a New Phase of Growth The company’s platform, The CrowdStrike Falcon, utilizes its proprietary CrowdStrike Threat Graph to identify security threats and prevent data breaches. CrowdStrike boasts that its platform combines AI and machine learning with behavioral analytics and 24/7 threat hunting, all in one solution to protect all workloads on the network – cloud-based, on-premise and virtual environments.
Thanks to its Falcon platform, CrowdStrike can attach new offerings to it (a strategy commonly known as “land and expand”). This, in turn, is allowing the company to enter a new phase of growth.
CrowdStrike has been adding features such as cloud security, identity security, and security operations, enabling it to steal market share from smaller single-product rivals. For example, Okta, Inc. (OKTA), a smaller firm focused on identity security, has seen its share price fall by 61% as of this writing, since 2021.
Now, there are two key drivers that allow this land-and-expand strategy to work.
The first is AI. Artificial intelligence relies on acquiring massive amounts of training data, which benefits large firms like CrowdStrike. These incumbents can “see” more threats thanks to their customer base, and so it creates a virtuous cycle. Larger companies create more powerful AI systems, which attract more new users, and so on. It’s also important to note that one solution can get rolled out to every customer. The second trend is corporate belt-tightening surrounding the costs of AI and cybersecurity. In the past, enterprises accepted multiple cybersecurity vendors since each software firm added another layer of potential protection. For example, a typical office worker might have signed on to their work computer with Okta verification and accessed their company’s network with a ZScaler product, all while routing communications through a Fortinet firewall. In 2020, Cisco estimated that as many as 13% of large firms used more than 20 separate cybersecurity vendors.
But that’s quickly changing thanks to one-stop shop firms like CrowdStrike.
By combining multiple products onto a single platform, these cybersecurity firms are able to both reduce costs while improving protection across the board. CrowdStrike now has a net retention rate of over 120%, an incredible figure given its size. New AI Opportunities Are Brewing The bottom line: CrowdStrike is a great company with plenty of potential upside. Due to its superior fundamentals, I even recommended it in Growth Investor earlier this year, and it’s now sitting pretty with a 32% return on my Growth Investor Buy List. However, there’s no denying that AI will likely play a large role in its future growth.
But it’s not the only company that’s set to benefit from artificial intelligence… There’s a new set of AI stocks that could take off on or before November 5.
I’ll admit, my latest prediction may be a bit controversial. But I have an obligation to tell my readers about profit opportunities in the market, plain and simple.
In short, my prediction has to do with former President Donald Trump – and how, if elected, he could usher in a Second Wave of the AI Boom.
As the election draws near, you’ll want to be prepared. Because a small subset of AI stocks are on the verge of massive gains.
Go here to learn more about my controversial prediction now.
(Already a Growth Investor subscriber? Click here to log in to the members-only website.) Sincerely, |
| Louis Navellier
Editor, Market 360
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
CrowdStrike Holdings, Inc. (CRWD) |
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