Bill 'Latency Lord' Brennan
Fundamental Growth Investor, B2B/Sector Leaders & Picks-and-Shovels
CrowdStrike and Cloudflare are likely flat until 2028-2030 even in the best case, and could be disasters for the next 3-5 years. Escaping requires Palantir- or Nvidia-style revenue acceleration and GAAP margin expansion, with double-digit sequential growth for many quarters over 3+ years. Without that there are no obvious incremental buyers, and once the charts break, institutions will run for the hills as they have before in these names, with zero valuation support. x.com
CrowdStrike and Palo Alto Networks need 50%-plus growth to deliver even a 10% IRR over a realistic horizon, but almost no conceivable case gets them there. They feel as dumb as Zoom and Peloton in 2021. Even if revenue doubles over four to five years, Palo Alto would still trade at 10x revenue and CrowdStrike at 20x, leaving little prospect of a real IRR; Palo Alto is growing in the teens today. x.com x.com x.com
CrowdStrike's growth is too slow to justify its valuation. Its forward P/E has climbed to about 190, while stock-based compensation exceeds operating earnings, so reported free cash flow margins do not show what the business actually earns. x.com x.com x.com x.com
CrowdStrike may distinguish itself from an expensive cybersecurity group by showing more breakneck growth at earnings next month. Fortinet's slowing product revenue exposed how much relentless execution investors had priced into the group's extreme multiples, pulling CrowdStrike down in sympathy. CrowdStrike remains in a higher tier than Fortinet, which itself ranks above SentinelOne. x.com x.com
CrowdStrike's 45x sales multiple on mid-20% revenue growth only works if multiple expansion continues in perpetuity, which no long holder can count on. x.com
CrowdStrike's valuation looks detached from its fundamentals. It is still unprofitable on a GAAP basis, trades at 116x forward earnings, and is growing more slowly than it was in 2021. x.com
Cloudflare deserves its premium multiple far more than CrowdStrike does. Cloudflare is growing about 40% against CrowdStrike's mid-20s, and it adds a call option on agentic expansion. Both trade at nosebleed valuations. x.com
CrowdStrike is now more overvalued than Cloudflare, trading at 45-50x sales for barely 26% revenue growth, which are mediocre numbers. Cloudflare's drop after its earnings could be the same script for CrowdStrike. x.com x.com x.com
Cloudflare at 38x NTM revenue and 150x NTM EBITDA is insane, so a decent return from here is unlikely even though it is the leader. That has never happened before without massive acceleration in growth rates and margin expansion. x.com
CrowdStrike is worth holding through the next cycle because enterprise-scale endpoint security is a fortress every company needs. x.com
CrowdStrike, Cloudflare and Shopify are priced too far ahead of reality, so incredible businesses with incredible managers can still be poor investments. If CrowdStrike reaches $7–8B of revenue and $2–3B of profit, paying $220B leaves little room for error or extraordinary returns. At stretched valuations the stock usually either falls hard or goes nowhere for years while fundamentals catch up, as happened with Veeva, Amazon, Tesla, MSCI, FICO and S&P Global. x.com
