Posted on January 13th, 2020
The shares of Crowd Strike Holdings, Inc. (CRWD) have plunged by more than 42% from the highs that followed their initial public offering [IPO] in June. However, the steep decline in the stock has caught the attention of the investing firm Point72 Asset Management, L.P., which is run by Steven A. Cohen, the famous hedge fund manager. According to an SEC filing on January 8, Point72 substantiality increased its stake in the equity, bringing its total ownership to over 5%.
Crowd Strike saw its stock surge following its IPO in June, finally peaking in August as valuations in the software and cybersecurity sector came into question. Shares came under more pressure in September, despite delivering better than expected earnings and forward guidance. However, the results were not good enough, and that sent the stock sharply lower. The final blow came to the company when its name popped up on a conference call between President Trump, and President Zelensky of Ukraine, in the lead up to President Trump’s impeachment investigation.
Still, a recent 13G filing on January 7 showed that Point72 increased its position in Crowd Strike to approximately 2.17 million shares from just 117,146 shares at the end of the third quarter of 2019. It gives the investment firm control of a 5.3% stake in Crowd Strike.
It seems that Point72 may have picked up their stake in the equity following a block trade conducted by Credit Suisse on January 6. The trade was for a 5 million share block of stock from an unknown shareholder. The block trade transaction would have made it very easy for a firm such as Point72 to establish a large position in the equity.
Slowing Growth Rates
Analysts’ consensus estimates forecast revenue growth for Crowd Strike to be very fast in 2020, rising by almost 87% in to $466.9 million. However, that rate of growth is estimated to slow dramatically in 2021 and rise by 46% to $680.6 million. It will then slow again by 2022 and increase by approximately 30% to $884.6 million.
However, the big problem for Crowd Strike will continue to be its valuation, with a market value of $11.7 billion. It leaves the stock trading with a one-year forward price to sales ratio at a very high 14.5 times estimates. Meanwhile, with the company is not expected to earn a profit until 2022, and with earnings of $0.07, the stock’s earnings multiple is even more extreme at 787.
Whether Point72 took a stake in Crowd Strike as a long-term holding investment for the company’s long-term growth potential, or a trade, is yet to be seen. It is something worth keeping an eye on in future filings.