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Jul 5, 2021
[4 min Read]
Hello I am an Ivy League Econ major who does not know how to talk to attractive women. As I type these hallowed words, I am wearing Sony XM-4s and bumping my 7 TeraByte folder of Playboi Carti leaks. Please see below my thoughts on the cybersecurity provider CrowdStrike, which trades on the Nasdaq as $CRWD.
The Kaseya ransomware attack this weekend affected 17 countries and 200 businesses. Cyberattacks are growing more and more frequent. Surely you've seen the news reports. Cyberattacks are also growing more and more sophisticated, so much so that they can even infiltrate American government agencies. The $750B the Pentagon gets every year wasn't enough to prevent that.
The consequences include breaches of sensitive user data and trade secrets, operational shut downs, and millions lost to paying ransoms. So, clearly, preventing these attacks is in the best interest of everyone from CEOs to Presidents to Winnie the Pooh looking ass dictators. Clearly they need to spend more. Cybersecurity products and services are going from "nice to have" to "gotta get it" status real fucking quick.
CrowdStrike is the first of its kind among cybersecurity companies. Incumbents like Palo Alto Networks, Symantec, and even FireEye (FireEye has a lot of respect in the public sector) are all Dotcom era dinosaurs.
That's because CrowdStrike is a cloud-native SaaS that leverages artificial intelligence (AI) to prevent attacks. That enough buzzwords for you?
Forrester, Gartner, MIT, and Google (an early investor) and many other reputable sources have called CrowdStrike leader in endpoint protection. The cloud-nativity has allowed it to strike partnerships to integrate with AWS and Google Cloud. CrowdStrike can just piggyback off their explosive growth.
The Bull Case
According to Grand View Research, the global cyber security services market size is expected to reach USD 192.70 billion by 2028.
I say the true opportunity is even bigger, because they haven't factored in all out cyberwar between America and the evil trinity of Russia/Iran/China. State-backed cyberattacks are nothing new. Remember North Korea and Sony back when the JamesFranco-SethRogen masterpiece The Interview came out? Or remember when Microsoft reported that foreign hackers were trying to compromise the 2020 elections? Remember when China agreed to invest $400B in Iran's tech sector?
And that's just the tip of the iceberg. Geopolitical tensions will of course continue to heat up. This is because humans are just a bunch of glorified, nuclear-powered apes. We will see stronger legislation mandating that businesses armor the fuck up. We will see outsized and reactionary government spending on cybersecurity. We will also likely see tax-payer funded incentives and subsidies directed toward cybsersecurity firms.
When I worked in venture capital for a summer, I realized just how important the management team is to potential investors. And CrowdStrike lives up to all expectations in this area.
George Kurtz, the CEO and Co-Founder of CrowdStrike has a track record of CyberSecurity success. His startup Foundstone was acquired by McAfee in 2004, after which he worked his way up the ranks to become the CTO of McAfee. Clearly, this guy knows what the fuck he's doing. He's no sleazy salesman, he's a princely technocrat.
The Chief Strategy Officer used to be the Executive Assistant Director of the FBI's Criminal, Cyber, Response and Services Branch. I'd bet my house that this white male has many white male friends in high places. Friends who'd gladly toss him a contract or two.
The rest of the C-Suite are all cyber veterans, even the CFO. It's a who's who of hacker nerds who saw the light.
Here's an overview of Q1FY22 results: Revenue increased 70% YoY, which reflects 82% growth in subscription customers. They had a net loss of $85M only because they are investing aggressively in growth and R&D. At the end of the day they have $1.7B cash on hand to weather any shitstorms.
The customer relationships are deep and broad. Recurring revenue is over $1B. Furthermore, existing customers end up buying more and more products from CrowdStrike as time goes on. 64% of customers have now adopted four or more CrowdStrike products into their subscription. And it's not like companies who need to cut costs are going to get rid of their cybersecurity provider.
Why buy a shitass SPAC for upside? $CRWD is a litass business with the world at its feet.
Sources: Most recent 10-Q, company website, Cybersecurity news reports on Financial Times, my friends in tech and the public sector, Mindfuck by Christopher Wylie, 1984 by Georgei Orwellovski, The Communist Manifesto by Karl Marx
Position: Shares for now because all my liquid savings are going toward rent, but I've got a sweetass summer internship and I promise to YOLO my next paycheck into this. Buy calls, shits finna rip Tuesday.