Is CrowdStrike Stock a Buy on the Dip?

Written by Geoffrey Seiler for The Motley Fool->

CrowdStrike turned in a strong quarter and also issued upbeat guidance to investors.

However, shares of the cyber-security specialist continue to trade at elevated levels.

CrowdStrike (NASDAQ: CRWD) shares slipped following its fiscal Q1 results, even as the company significantly raised its full-year annual recurring revenue (ARR) guidance. Nonetheless, the cybersecurity stock is still up more than 50% for the year.

With the company continuing to produce strong growth, let's see if investors should buy the dip in the stock.

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CrowdStrike said the cybersecurity industry hit an inflection point in the quarter, with Anthropic's Mythos revelation underscoring the importance of cybersecurity for artificial intelligence (AI) infrastructure. It said this helped shift the narrative from fear that AI would disrupt cybersecurity to organizations wanting to ensure they were protected from AI. As a result, the company increased its full-year ARR growth forecast to 27% to 29%, up from a prior outlook of 23% to 24%.

During the quarter, the company saw ending ARR jump 24% to $5.51 billion. Net new ARR, meanwhile, climbed 32% to $256 million. ARR is the annualized value of its high-gross-margin subscriptions and doesn't contain its professional services revenue. Revenue increased 26% to $1.39 billion, while subscription revenue also rose 26% to $1.362 billion. CrowdStrike's adjusted earnings per share (EPS) soared 51% to $1.10.

The company's Falcon Flex licensing model, which gives customers access to its whole cybersecurity product portfolio while paying only for deployed modules, continues to be a driver, with ARR nearly doubling to $1.9 billion. It added 300 new Flex accounts and saw 480 Reflex customers.

Its next-gen SIEM (security information and event management), cloud security, and identity businesses combined grew to over $2 billion in ARR. AI detection and response (AIDR) was an emerging bright spot, seeing its ARR surge 250% sequentially and having a pipeline of over $50 million.

Looking ahead, CrowdStrike guided for fiscal 2027 revenue in a range from $5.915 billion to $5.959 billion (23% to 24% growth) and adjusted EPS guidance between $4.88 and $4.96. That's up from its prior outlook for revenue of between $5.868 billion and $5.928 billion (22% to 23% growth) and adjusted EPS guidance between $4.78 and $4.90.

For fiscal Q2, it projected adjusted EPS of $1.16 to $1.17 on revenue of between $1.436 billion and $1.442 billion (23% growth). ARR is projected to grow between 28% and 29%. It also announced a 4-for-1 stock split.

CrowdStrike's ARR appears to be set to accelerate as the importance of cybersecurity in a fast-evolving AI world helps take it to new heights. The company has long been the leader in the endpoint space, and its Falcon Flex licensing model, while now widely copied, continues to help drive momentum for its next-gen security modules.

That said, with the stock trading at a forward price-to-sales (P/S) multiple of about 31, based on analysts' estimates, it is outrageously expensive at current levels. As such, I'd stay on the sidelines.

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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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