How to Trade Crowdstrike’s 50% Surge Amid Cybersecurity Boom
Cybersecurity stocks have been in hot demand this year after a wave of ransomware attacks on big institutions such as the United States largest oil pipeline system, Colonial Pipeline.
More and more businesses are using cybersecurity companies to help protect against online attacks – a trend that is only likely to continue for some time.
While most analysts are bullish on cybersecurity stocks, many of them have been trading at very high multiples, even by a technology company standard.
This is also why the recent 37% drop in cybersecurity stock Crowdstrike Holdings is interesting to long-term investors. Learn more about it further below.
|Stock:||Crowdstrike Holdings Inc|
|Symbol for Invest.MT5 Account:||CRWD|
|Date of Idea:||15 December 2021|
|Time Line:||1 - 9 months|
|Position Size for Invest.MT5 Account:||Max 7%|
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade Crowdstrike Holdings Stock?
Since the Crowdstrike Holdings IPO (initial public offering) in June 2019, the stock soared more than 365% to reach a record high in November 2021. The stock is now down more than 35% from its record high after a downgrade from investment bank Morgan Stanley.
However, the majority of analysts are still bullish on the long-term prospects of Crowdstrike Holdings stock and the general cybersecurity sector. Let’s take a look at a few of the reasons why some analysts are forecasting new record highs for the stock in the next twelve months.
Reason 1: Cybersecurity meets cloud computing – two very hot sectors
Over the past several years, the cybersecurity and cloud computing sectors have grown the fastest. Crowdstrike Holdings combines both of these sectors in a unique offering for the industry. Recent earnings show the company has experienced an increase in levels of enterprise spending on security.
According to analysts at Needham & Co, Crowdstrike is showing signs of strong growth and is well placed to capitalise on an increased need for security from cyberattacks from its market-leading cybersecurity cloud-based platform which is easily scaled. They have assigned a price target of $340 per share which is well above the current all-time high price level.
Reason 2: Recent earnings and forward guidance beat expectations
In the latest earnings report, Crowdstrike reported revenue of $380 million against expectations of around $363 million. The company also beat on its earnings per share after reporting $0.17 per share which was 70% higher than what analysts were expecting.
Most importantly, the forward guidance for revenue, sales and profits for the next quarter were higher than analyst expectations. New product launches and acquisitions are also likely to benefit the company and boost its key product the Falcon platform.
Reason 3: The recent drop has caused an increase in buy ratings
When Morgan Stanley put a sell rating on Crowdstrike Holdings stock price, the share price sank 10% and kept on falling to record a current 35% drop from its record high. The commentary from the analysts stated the stock was ‘too expensive.’
However, the recent drop has led to some analysts immediately putting a buy rating on the stock. This includes investment JP Morgan which upgraded the stock to overweight on 14 December, highlighting the potential for at least 25% upside based on its recent earnings report.
Crowdstrike Holdings Stock - What are the Analysts Forecasting?
According to analysts polled by MarketBeat for a long-term forecast on Crowdstrike Holdings stock price, there are currently a higher amount of buy ratings than there are sell ratings.
The number of buy ratings has held steady over the past several months but dropped one as Morgan Stanley change its forecast (before the recent 35% drop, however). The buy ratings are significantly higher than from the same time last year.
Source: MarketBeat, 15 December 2021
An Example Trading Idea for Crowdstrike Holdings Stock
An example trading idea for Crowdstrike Holdings stock price could be as follows:
- Buy the stock on a break above $200.50.
- Target the all-time high and median analyst price target at $300.00.
- Keep your risk small at a maximum of 7% of your total account.
- Time Line = 1 – 9 months
- If you buy 10 Crowdstrike Holdings shares:
- If target is reached = $995.00 profit ($300.00 - $200.50 *10 shares).
It’s wise to remember that the share price is unlikely to go up in a straight line and it may even go much further down before it rises. Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.
Another factor to consider is the commission as these can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in Crowdstrike Holdings stock would result in a commission of $0.20 ($0.02 * 10 shares).
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a commission of just $1 overall!
How to Buy Crowdstrike Holdings Stock in 4 Steps
With Admirals, you can buy shares in US companies like Crowdstrike Holdings with a low commission of just $0.02 per share and a low minimum commission of just $1.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for Crowdstrike at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Source: Admirals MetaTrader 5 Web. Past performance is not a reliable indicator of future results, or future performance.
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Do You See Crowdstrike Holdings Stock Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance Crowdstrike's share price will move lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
This means you can trade long and short to potentially profit from rising and falling stock prices. Learn more about CFDs in this How to Trade CFDs article.
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