CrowdStrike, a company known for its endpoint protection services, has been making headlines following a major IT outage that has been described as one of the worst the world has ever seen. The company, based in Austin, Texas, has been a favorite among investors and is considered one of the top-performing stocks on both the tech-heavy Nasdaq and the broader S&P 500 index.
As of the close of trading on Thursday night, CrowdStrike’s market value was at an impressive £84bn, with its share price soaring by 96% so far in 2024. The company’s success can be attributed to its AI-enabled services and its reputation as a one-stop-shop for endpoint protection, which includes threat detection, data leak prevention, and network administration.
One of the key factors that have made CrowdStrike a popular choice among investors is its significant market share of 24% in the endpoint protection market. Additionally, the growing demand for cyber security services due to the increasing migration of data and IT services to the cloud has also contributed to the company’s success. With less than half of global workloads currently migrated to the cloud, there is expected to be a surge in demand for cyber security services in the future.
Moreover, the new rules announced by the Securities & Exchange Commission in 2023, which require public companies to disclose cyber security incidents and their risk management, have also been seen as a driving force behind the demand for CrowdStrike’s services. The company has also benefited from increased government spending on cyber security, particularly in the United States.
With its impressive performance, CrowdStrike has been trading at a staggering valuation. The company is currently valued at a multiple of 98 on its expected earnings for the year, compared to the S&P 500’s multiple of 28.
The man behind CrowdStrike’s success is George Kurtz, the company’s president and chief executive. Kurtz, whose stake in the company is valued at $4.2bn, has a background in accounting and previously founded an anti-virus software company called Foundstone. He then went on to become the chief technology officer of McAfee before leaving to join Warburg Pincus, where he envisioned building a cloud-based endpoint protection service.
In 2016, CrowdStrike gained widespread attention after revealing that it had identified Russian intelligence groups attempting to hack various US government entities and interfere in the US presidential election. This revelation was a significant turning point for the company, which attracted investments from major backers, including Google. CrowdStrike went public in 2019 and was valued at $11bn.
However, the recent IT outage has put a strain on the company’s success story and has raised concerns about how Kurtz will handle the crisis. In an interview with NBC, Kurtz apologized to CrowdStrike’s customers and acknowledged that a software bug had caused the issue. His comments, however, may further damage the company’s relationship with Microsoft, which has become increasingly fractious.
As the fallout from the IT outage continues, it is expected to have significant repercussions in the long run. Critics, such as JD Vance, former vice presidential nominee, have raised concerns about the concentration of power among big tech companies and their control over essential IT infrastructure. Microsoft, in particular, is likely to face increased scrutiny from politicians and regulators. However, some of CrowdStrike’s biggest supporters, such as Dan Ives of Wedbush Securities, remain positive about the company’s long-term prospects.
