A Look At Crowdstrike's Q4 and Annual Results

Cybersecurity firm Crowdstrike (CRWD) reported their fourth quarter and full year 2022 earnings earlier this week.

The report looked really strong. Revenues for the quarter were up 48%, and 54% for the entire year. Free cash flow was up 66% for the year and the company delivered a free cash margin of 38.5%, well above my long-term 35% expectation. Real cash return on investment was 65%, another outstanding figure.

Business metrics were also impressive. Annual recurring revenue (ARR) grew 48% year-over-year to $2.56 billion, with over $800 million of it consisting of new service wins. The company added nearly 1,900 new customers in the quarter, a quarterly record, and now has over 23,000 subscription clients (up 41% over last year). Gross retention was 98%, illustrating how "sticky" Crowdstrike's services are with customers, and net revenue retention was 125%, showing how the firm is able to "land-and-expand" as a key part of their growth strategy. Just excellent results all around.

The market sold off Crowdstrike after Q3 results, and only now is the stock starting to rebound back from that. From my point of view, the stock still looks substantially undervalued. After incorporating management's 2023 guidance, I'm maintaining the $222 fair value estimate, which represents over 40% upside from the current price of about $130. CRWD continues to look like a good buy here.