Nvidia: A Soaring Growth Stock for Long-Term Investors

1 Soaring Growth Stock to Buy and Hold for 10 Years | The Motley Fool

There is still much growth left in this red-hot cybersecurity stock. The frequency and cost of cyberattacks worldwide have been seeing an unprecedented rise. According to Security Magazine, there are 2,220 cyberattacks every day, translating to one cyberattack every 39 seconds. The global cybercrime costs are expected to reach a mind-boggling $10.5 trillion by 2025. Hence, it is no surprise that cybersecurity solutions, which protect sensitive data and prevent operational disruptions, are mission-critical for maintaining the reputation and brand of organizations worldwide. Cybersecurity specialist CrowdStrike (CRWD 0.24%) is successfully capitalizing on this expanding market opportunity. The stock has had a dream run in the past year, soaring 165%. Furthermore, despite the solid recent gains, the stock is looking like an exceptional pick for the coming decade. Here's why CrowdStrike can be a compelling choice for astute investors. CrowdStrike's cloud-native artificial intelligence (AI)-powered Falcon platform has 28 modules catering to a wide range of cybersecurity needs. Hence, organizations are increasingly simplifying their security stacks by replacing multiple pinpoint security solutions with Falcon modules. CrowdStrike's strategy of positioning itself as a consolidation play is proving successful, considering that the number of deals involving eight-plus Falcon modules has grown 95% year over year in the first quarter of fiscal 2025 (ended March 31, 2024). The number of deals involving Falcon identity, cloud, or Next-Gen Security Information & Event Management (SIEM) modules also more than doubled year over year in Q1. Furthermore, demand for new platform innovations such as data protection modules and Charlotte AI (the generative-AI powered cybersecurity assistant integrated into the Falcon platform to let users analyze, understand, and manage cyberthreats effectively) is also picking up steam. The introduction of the Falcon Flex subscription model (a flexible licensing approach that allows organizations to scale up or down their cybersecurity capabilities as per their needs) has further boosted the adoption of CrowdStrike's Falcon platform. The new licensing model has generated over $500 million in deal value in the last three quarters. CrowdStrike's management remains committed to reaching $10 billion in annualized recurring revenue (ARR, a metric to gauge the health of subscription business) by calendar year 2028. The company's ARR was up year over year by 33% to $3.65 billion at the end of the first quarter. While reaching the $10 billion ARR target seems daunting (requiring the company to continue its 30%-plus year-over-year ARR growth trajectory for subsequent quarters), analysts seem to find it a potentially achievable target. They have estimated the company's fiscal 2029 revenue (ending Jan. 31, 2029) to be nearly $10.5 billion. Besides impressive revenue targets, CrowdStrike also boasts rapidly improving profitability and robust free cash flows. The company has been GAAP (generally accepted accounting principles) profitable for five consecutive quarters. CrowdStrike expects fiscal 2025 non-GAAP net income to fall between $985.6 million to $1.012 million. CrowdStrike reported a record free cash flow (FCF) of $322 million in the first quarter, up 42% on a year-over-year basis and accounting for nearly 35% of its Q1 revenue. The company is guiding for its FCF margin to be 31% to 33% of revenue in fiscal 2025. The company has been expanding its partner ecosystem, which includes cloud service providers, Managed Security Service Providers (MSSPs), and Manage Detection and Response (MDR) providers. The MSSP and MDR partners have been a major source of new customer acquisition, as they are actively migrating their customers from point products and multi-platform security products to the Falcon platform. CrowdStrike has also been quite successful in attracting top-tier talent, as is evident from the 687,000 applications secured from people keen on working for the company just in the past five quarters -- and the company hires just a small fraction of that amount. While it is impossible to accurately predict the future, we can build some reasonable expectations about CrowdStrike's future growth trajectory based on consensus analyst estimates. Analysts expect CrowdStrike's revenue to grow by almost ninefold, from $3 billion in fiscal 2024 (ended Jan. 31, 2024) to about $27 billion in fiscal 2034. The stock is trading at a price-to-sales (P/S) multiple of 28.8. Assuming that the multiple reverts to its five-year average of 29.3, we can expect its market capitalization to be around $791 billion -- almost 8.3 times its current market capitalization of $95 billion.

1 Soaring Growth Stock to Buy and Hold for 10 Years

The frequency and cost of cyberattacks worldwide have been seeing an unprecedented rise. According to Security Magazine, there are 2,220 cyberattacks every day, translating to one cyberattack every 39 seconds. The global cybercrime costs are expected to reach a mind-boggling $10.5 trillion by 2025. Hence, it is no surprise that cybersecurity solutions, which protect sensitive data and prevent operational disruptions, are mission-critical for maintaining the reputation and brand of organizations worldwide. Cybersecurity specialist CrowdStrike (NASDAQ: CRWD) is successfully capitalizing on this expanding market opportunity. The stock has had a dream run in the past year, soaring 165%. Furthermore, despite the solid recent gains, the stock is looking like an exceptional pick for the coming decade. Here's why CrowdStrike can be a compelling choice for astute investors. Multiple growth avenues CrowdStrike's cloud-native artificial intelligence (AI)-powered Falcon platform has 28 modules catering to a wide range of cybersecurity needs. Hence, organizations are increasingly simplifying their security stacks by replacing multiple pinpoint security solutions with Falcon modules. CrowdStrike's strategy of positioning itself as a consolidation play is proving successful, considering that the number of deals involving eight-plus Falcon modules has grown 95% year over year in the first quarter of fiscal 2025 (ended March 31, 2024). The number of deals involving Falcon identity, cloud, or Next-Gen Security Information & Event Management (SIEM) modules also more than doubled year over year in Q1. Furthermore, demand for new platform innovations such as data protection modules and Charlotte AI (the generative-AI powered cybersecurity assistant integrated into the Falcon platform to let users analyze, understand, and manage cyberthreats effectively) is also picking up steam. The introduction of the Falcon Flex subscription model (a flexible licensing approach that allows organizations to scale up or down their cybersecurity capabilities as per their needs) has further boosted the adoption of CrowdStrike's Falcon platform. The new licensing model has generated over $500 million in deal value in the last three quarters. CrowdStrike's management remains committed to reaching $10 billion in annualized recurring revenue (ARR, a metric to gauge the health of subscription business) by calendar year 2028. The company's ARR was up year over year by 33% to $3.65 billion at the end of the first quarter. While reaching the $10 billion ARR target seems daunting (requiring the company to continue its 30%-plus year-over-year ARR growth trajectory for subsequent quarters), analysts seem to find it a potentially achievable target. They have estimated the company's fiscal 2029 revenue (ending Jan. 31, 2029) to be nearly $10.5 billion. Rapidly improving financials Besides impressive revenue targets, CrowdStrike also boasts rapidly improving profitability and robust free cash flows. The company has been GAAP (generally accepted accounting principles) profitable for five consecutive quarters. CrowdStrike expects fiscal 2025 non-GAAP net income to fall between $985.6 million to $1.012 million. CrowdStrike reported a record free cash flow (FCF) of $322 million in the first quarter, up 42% on a year-over-year basis and accounting for nearly 35% of its Q1 revenue. The company is guiding for its FCF margin to be 31% to 33% of revenue in fiscal 2025. Strategic partnerships and talent acquisition The company has been expanding its partner ecosystem, which includes cloud service providers, Managed Security Service Providers (MSSPs), and Manage Detection and Response (MDR) providers. The MSSP and MDR partners have been a major source of new customer acquisition, as they are actively migrating their customers from point products and multi-platform security products to the Falcon platform. CrowdStrike has also been quite successful in attracting top-tier talent, as is evident from the 687,000 applications secured from people keen on working for the company just in the past five quarters -- and the company hires just a small fraction of that amount. Valuation and growth potential While it is impossible to accurately predict the future, we can build some reasonable expectations about CrowdStrike's future growth trajectory based on consensus analyst estimates. Analysts expect CrowdStrike's revenue to grow by almost ninefold, from $3 billion in fiscal 2024 (ended Jan. 31, 2024) to about $27 billion in fiscal 2034. The stock is trading at a price-to-sales (P/S) multiple of 28.8. Assuming that the multiple reverts to its five-year average of 29.3, we can expect its market capitalization to be around $791 billion -- almost 8.3 times its current market capitalization of $95 billion. Before you buy stock in CrowdStrike, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and CrowdStrike wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $791,929!* Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.