Rose Celine Investments
Equity Investor
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
Palantir, Cloudflare and CrowdStrike will eventually face the valuation reset now hitting ServiceNow and FICO, because no business is worth an infinite amount. ServiceNow's core economics remain elite despite some deceleration; its stock is falling because investors pushed the multiple to levels that made no sense, and it is reverting to the mean. These are phenomenal businesses with strong leadership, but that does not protect against multiple contraction when expectations get stretched. 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 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
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 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
Cloudflare and CrowdStrike valuations are in la-la land. Per a SergeyCYW comparison of growth per unit of EV/sales, Cloudflare trades at 34x sales and CrowdStrike at 30x. 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 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
Combining estimated NTM revenue growth with trailing GAAP EBITDA margin makes Palo Alto Networks, Datadog, JFrog, Rubrik and Snowflake look overvalued against forward EV/sales. Zoom, Alphabet, Oracle, AppLovin, Microsoft, Fair Isaac, Adobe, Amazon and Teradata remain undervalued on this Rule of 40 comparison; Palantir, Cloudflare and CrowdStrike remain overvalued. x.com
Shopify is becoming the infrastructure layer between merchants and AI agents, making AI a source of new demand rather than only a threat. In Q2, AI-driven traffic and orders tripled, and new-buyer orders from AI channels came at nearly twice other channels' rate. Its Catalog gives agents over 1 billion products with 2x higher conversion, and MRR growth reached 19%. A 79x forward P/E premium is justified by accelerating growth, strong retention and improving profitability, if execution holds. … Show more
CrowdStrike at 45x revenue is even sillier than its valuation back in 2020, when its fundamentals were far stronger: customer count grew 116%, revenue guidance beat the Street and sales and acquisition costs fell. There was a time to own it; that time is not now. x.com
