Hi Kris, Thank you for your insight, even anecdotes; I too have polled similar contacts and have heard the same thing. CRWD's recent earnings implied that their product is still taking share despite nearly all other peers decelerating, which may be why valuation is still fairly formidable. I have two questions. First questions is, as Morgan Housel puts it (sic) "true risk is what you DON'T account for after everything is factored in". What is the true risk for CRWD? Perhaps they are the best platform/product but due to this or another event, their competitors with "good enough" products take share. The imputed economics of cyberattacks say not likely but in the market it is not the obvious/next level thought that is the winning way to invest but the level above that. Second question is, as a mostly growth company; how would you see valuation here if CRWD continues to increase FCF at a higher rate than the market implies? Do you believe in reverse DCF modeling? If CRWD comes back stronger (let's say a main competitor has an actual product issue), at what growth rate would today's prices meet your hurdle? Most articles talk about the base case and downside risk, which are most important. However, many don't model out the range of outperformance possible/needed to justify a premium in time. CRWD so far has been one of those outperformers, would it not make sense to consider (via sensitivity analysis) what that would look like? Just fleshing out the levels of thought here: market telegraphs that CRWD is expensive and the gaffe may cost it business/money, thus the decline. Market thinkers a level above say CRWD moat is still intact and only temporarily affected but valuation is historically elevated so not a great bargain (and thus communicating market sentiment that CRWD is still top dog). The level above that (if I can presume that), the likelihood of an unclear negative catalyst or larger than anticipated effect on earnings/reputation causing medium to long term damage is less likely. Thus premium is maintained. In fact, CRWD has bottomed in sentiment but operationally will get stronger. Perhaps the operating leverage from its recent GaaP positive trend accelerates and this period is allowing big money to layer into the next step up. Thank you for your time.
Great write-up! Learned a lot!
Thank you very much for your kind feedback!
Hi Kris, Thank you for your insight, even anecdotes; I too have polled similar contacts and have heard the same thing. CRWD's recent earnings implied that their product is still taking share despite nearly all other peers decelerating, which may be why valuation is still fairly formidable. I have two questions. First questions is, as Morgan Housel puts it (sic) "true risk is what you DON'T account for after everything is factored in". What is the true risk for CRWD? Perhaps they are the best platform/product but due to this or another event, their competitors with "good enough" products take share. The imputed economics of cyberattacks say not likely but in the market it is not the obvious/next level thought that is the winning way to invest but the level above that. Second question is, as a mostly growth company; how would you see valuation here if CRWD continues to increase FCF at a higher rate than the market implies? Do you believe in reverse DCF modeling? If CRWD comes back stronger (let's say a main competitor has an actual product issue), at what growth rate would today's prices meet your hurdle? Most articles talk about the base case and downside risk, which are most important. However, many don't model out the range of outperformance possible/needed to justify a premium in time. CRWD so far has been one of those outperformers, would it not make sense to consider (via sensitivity analysis) what that would look like? Just fleshing out the levels of thought here: market telegraphs that CRWD is expensive and the gaffe may cost it business/money, thus the decline. Market thinkers a level above say CRWD moat is still intact and only temporarily affected but valuation is historically elevated so not a great bargain (and thus communicating market sentiment that CRWD is still top dog). The level above that (if I can presume that), the likelihood of an unclear negative catalyst or larger than anticipated effect on earnings/reputation causing medium to long term damage is less likely. Thus premium is maintained. In fact, CRWD has bottomed in sentiment but operationally will get stronger. Perhaps the operating leverage from its recent GaaP positive trend accelerates and this period is allowing big money to layer into the next step up. Thank you for your time.
Tyea, solid analysis. A weaker narrative driven post would rated this a solid buy just based on the sell-off