Why Is CrowdStrike (CRWD) Stock Rocketing Higher Today

Adam Hejl /
2024/06/10 1:41 pm EDT

What Happened:

Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) jumped 9.6% in the morning session after the announcement that the company would join the S&P 500 index before the start of trading on Monday, June 24, 2024. The S&P 500 is a widely followed index that tracks the performance of the roughly 500 largest companies in the United States. Being included in the index means that CrowdStrike will likely be held by many index and mutual funds as well as ETFs, which could potentially drive up demand for the stock. 

We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.

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What is the market telling us:

CrowdStrike's shares are quite volatile and over the last year have had 15 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The previous big move we wrote about was 5 days ago, when the stock gained 12.6% on the news that the company reported a "beat and raise" quarter. CrowdStrike narrowly exceeded analysts' revenue and annual recurring revenue (ARR) expectations, indicating continued customer investment in its products. Remaining performance obligations (RPO - leading revenue indicator) came in even stronger, accelerating to 42% y/y from 37% last quarter and ahead of analysts' expectations. 

Looking ahead, CrowdStrike raised its full-year revenue and EPS guidance, which beat Wall Street's projections. The outlook was impressive, given what management considered a "challenging macro environment." 

Zooming out, this was a great quarter, showing that the company is staying on target.

CrowdStrike is up 53.8% since the beginning of the year. Investors who bought $1,000 worth of CrowdStrike's shares 5 years ago would now be looking at an investment worth $6,548.

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