Citi raises CrowdStrike shares target in light of strong Q4

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Citi raises CrowdStrike shares target in light of strong Q4
Credit: © Reuters.

On Thursday, Citi maintained its Buy rating on shares of CrowdStrike Holdings Inc. (NASDAQ: CRWD ) and increased the price target to $425 from the previous $320. The firm's confidence in the cybersecurity company's growth trajectory and profitability potential has been bolstered following a strong fiscal fourth quarter performance.

CrowdStrike reported impressive top and bottom line results, exceeding expectations and calming investor concerns. The company's effective execution and expansion of its product portfolio have been key factors in its success. This performance has reinforced Citi's belief in CrowdStrike's ability to sustain long-term growth and reach the highly-profitable $10 billion annual recurring revenue (ARR) milestone.

The results left little room for criticism, with the discussion primarily focusing on the company's valuation. Citi argues that CrowdStrike's ARR and free cash flow (FCF) compound annual growth rates (CAGRs) of approximately 30% and 40%, respectively, at scales greater than $3 billion and around $1 billion, warrant a sustained premium valuation. This is attributed to the company's exceptional execution and scarce value in the market.

Citi's analysis also points to multiple avenues for growth that CrowdStrike has yet to fully exploit, including new module penetration, public sector opportunities, and a compelling narrative around its Generation AI technology. Additionally, a growing renewal cycle and customer base further support the expectation of steady upside in the company's financial numbers.

The anticipated inclusion of CrowdStrike in a major index is seen as a catalyst that, combined with the aforementioned factors, has led Citi to reaffirm its Buy rating and raise the price target to $425, based on higher estimated earnings and terminal multiples.

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