By Akash Sriram
(Reuters) – CrowdStrike surged 23% before the bell on Wednesday, sparking a rally in cybersecurity stocks, after the company’s upbeat annual forecasts signaled healthy demand for platforms that act as one-stop shops for security.
Businesses have preferred consolidated platforms as a means to optimize spending and make operations more efficient at a time when cybersecurity threats became more sophisticated with the rise of generative AI.
The results also offered some respite to investors after sector heavyweight Palo Alto Networks cut its forecast last month due to softer client spending and steep promotions.
“CrowdStrike needed to deliver at or close to perfection. The company did just that,” BTIG analyst Gray Powell said.
Based on premarket gains, CrowdStrike’s market value was set to jump by more than $16 billion to about $88 billion. If gains hold, that would bring it closer to Palo Alto, which is the largest U.S. cybersecurity firm with a market value of about $94 billion.
“This (CrowdStrike) does feel like the next mega-cap company and the first to truly separate itself from the rest of the younger enterprise software companies,” said investor Ophir Gottlieb, CEO of Capital Market Laboratories.
Shares of Palo Alto and other cybersecurity firms such as ZScaler, Fortinet and SentinelOne rose between 4% and 8.5% in premarket trading.
CrowdStrike forecast its annual adjusted profit to be between $3.77 and $3.97 per share and revenue in the range of $3.92 billion to $3.99 billion, both of which were above Wall Street estimates.
Finance chief Burt Podbere said on an earnings call the forecast assumes a tough economic backdrop, a sign that high interest rates were continuing to weigh on some client spending.
The stock trades at 74.47 times its forward earnings estimates, higher than the 49.09 for Palo Alto and 39.01 for Fortinet.
(Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar)
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