Equities: New extremes and a challenging opportunity set
Discover insights on the future of equity markets in Q1 2024 and navigate the potential recession with strategic investment choices.
Head of Equity Strategy
Summary: The cyber security industry has been the second best performing theme in equity markets this year driven by strong demand and higher profitability. CrowdStrike reports earnings today with analysts remaining bullish expecting revenue growth of 34% and new record on free cash flow. A better than expected earnings result from CrowdStrike tonight could lift the entire industry in tomorrow's trading session. We remain positive on the industry expecting revenue growth to remain well above 15% annualised in the coming years and we expect consolidation to accelerate in the coming years improving profitability in the industry even further.
CrowdStrike is the fifth largest cyber security company in the world measured on revenue and reports FY24 Q3 (ending 31 October) earnings tonight after the US market close. Analysts remain bullish on the company with revenue growth expected at 34% y/y and EBITDA rising to $184mn from a loss of $31mn a year ago. The company is also expected to deliver a new all-time high on free cash flow underscoring that the company has hit an inflection point in terms of profitability which has been rewarded by the market with the share price up 99.5% this year.
CrowdStrike is the category leader in what is called corporate endpoint security which have served them well with their Falcon Platform. CrowdStrike has delivered 37% annualised revenue growth since Q1 2018. One risk for CrowdStrike is their lack of SASE exposure which is this new delivery model in cyber security – see the explainer below for the difference in traditional cyber security and the new SASE model where companies such as Zscaler and Palo Alto Networks (the largest cyber security firm on revenue) are dominating.
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