GrowthTurtle
Data Science PhD & IEEE Fellow, Ex-Two Sigma
CrowdStrike is not a buy because AI lowers software's barriers to entry, undermining the premium in its multiple. At 34x sales and 109x forward earnings on already-cooling 26% growth with a negative operating margin, it is priced for durable 30%-plus growth and an endpoint-security moat that hyperscalers can fold into their bundles for free. x.comÂ
CrowdStrike's premium valuation is a story, because AI is commoditizing security software by lowering barriers to entry. The moat was switching costs, never scarcity. At 34x sales and 109x forward earnings, it prices durable 30%+ growth that its unit economics do not deliver, while growth of 26% is decelerating and the operating margin is negative. x.comÂ
CrowdStrike at 40x forward sales is hard to take seriously as a best idea into 2027. x.comÂ
CrowdStrike at 30x sales for a $170 billion software company is hard to see ending well. x.comÂ
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.comÂ
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.comÂ
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.comÂ
CrowdStrike's re-rating reflects a massively expanded market in which security seats are defined by AI agents rather than employees. The Mythos model announcement and a frontier model going rogue with cyber attacks changed the fundamentals since the stock was at $100. It is very expensive versus its history and peers, and @InvestingVisual notes it trades at 109x forward free cash flow, but that does not mean nothing has changed. x.comÂ
SentinelOne appears undervalued relative to its expected revenue growth. Analysts forecast 19.2% NTM revenue growth, versus 23.2% for CrowdStrike, which trades at a premium on forward EV/sales. x.comÂ
CrowdStrike is not worth buying at 40x revenue, and there are very few plausible scenarios in which it is ever worth that multiple. AI is not overhyped, but the argument that massive tech disruption justifies the price echoes 2021, when Covid was said to be changing how people worked. As in 300 years of technological change, there are likely far fewer losers than expected. x.com x.comÂ
CrowdStrike is worth holding through the next cycle because enterprise-scale endpoint security is a fortress every company needs. x.comÂ
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.comÂ
