We recently published a list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. In this article, we are going to take a look at where CrowdStrike Holdings, Inc. (NASDAQ:CRWD) stands against other stocks that Jim Cramer thinks deserve attention.
In a recent episode of Mad Money, Jim Cramer advised investors to hold off on selling stocks, anticipating a rebound once the market’s downturn ended. This strategy proved effective as the average investor saw gains, with the Dow rising by 484 points or 1.16%, and the NASDAQ also climbing by 1.16%. This performance suggests that selling during Friday’s decline was not the best move.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
The previous week was challenging for economically sensitive stocks and tech stocks, despite the August employment report showing modest growth and a downward revision for July. The recent report seemed favorable for those hoping for Federal Reserve rate cuts, as it presented a balanced scenario of neither too strong nor too weak. Nonetheless, Wall Street reacted negatively, with investors moving away from cyclical stocks in favor of recession-proof sectors like consumer goods and pharmaceuticals. Industrials and semiconductors were particularly affected.
Jim Cramer observed that on Monday, recession-proof stocks such as pharmaceuticals, drug wholesalers, and medical devices continued to perform strongly. However, this trend is concerning as these stocks have surged significantly and might be due for a correction.
“Recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
According to Cramer, historically, when the Federal Reserve is about to cut rates, it’s a signal to shift investment strategies. With the Fed moving towards easing and a rate cut expected next week, Cramer suggests it’s time to reconsider holding recession-proof stocks. Instead, investors should look at more cyclical companies that could benefit from economic stimulation. While investing in cyclical stocks during a downturn can be challenging, anticipating a positive impact from the Fed’s rate cuts could make these stocks attractive.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Security personnel at their consoles, monitoring a global network of threats in real-time.
CrowdStrike Holdings Inc. (NASDAQ:CRWD)
Number of Hedge Fund Investors: 69
Jim Cramer pointed out that Morgan Stanley has expressed concerns about CrowdStrike Holdings Inc. (NASDAQ:CRWD)’s stock in the short term as the cybersecurity firm approaches its investor day on September 18. Analysts believe that Wall Street’s expectations for CrowdStrike Holdings Inc. (NASDAQ:CRWD) remain too high, despite the company recently lowering its full-year guidance due to the global IT outage in July. Nonetheless, Morgan Stanley has kept its buy-equivalent rating on the stock.
“Morgan Stanley is worried in the short term about CrowdStrike’s stock ahead of the cybersecurity firm’s investor day set for Sept. 18. Analysts said Wall Street estimates are still too high, even after CrowdStrike lowered full-year guidance late last month to reflect the impact of the global IT outage in July. Still, the firm maintained its buy-equivalent rating on the stock.”
In Q3 2023, CrowdStrike Holdings Inc. (NASDAQ:CRWD) exceeded expectations, showing strong demand for its cloud security and identity protection products. Despite a challenging macroeconomic environment, CrowdStrike Holdings Inc. (NASDAQ:CRWD) achieved notable profitability gains. CrowdStrike Holdings Inc. (NASDAQ:CRWD) is expected to grow its earnings by 28.14% annually over the next few years, surpassing industry averages. Revenue is projected to rise at an 18.12% annual growth rate, driven by increasing adoption of its cloud security, identity protection, and AI-driven solutions.
As a leader in endpoint security, CrowdStrike Holdings Inc. (NASDAQ:CRWD) is also expanding into areas like SIEM, CNAPP, and identity security, supported by its innovative AI and cloud technologies. Analysts are very positive, with price targets between $222 and $334.80, reflecting strong confidence in CrowdStrike Holdings Inc. (NASDAQ:CRWD)’s growth despite broader economic challenges.
Baron Fifth Avenue Growth Fund stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q2 2024 investor letter:
“CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a cloud-architected SaaS cybersecurity vendor offering endpoint security, threat intelligence, and cyberattack response services. Shares continued their strong performance from the first quarter and were again a top contributor, rising 19.5% in the second quarter on better execution than peers in the broader security space.
The company reported strong quarterly results with 33% year-over-year revenue growth, driven by customers consolidating their cybersecurity spend on CrowdStrike with free cash flow margins reaching 35%. With accelerating market share gains in its core endpoint detection and response offering, emerging products including Cloud, Identity, and SIEM reaching material scale, and newer products in data protection and AI ramping quickly, net new annual recurring revenue and total revenue look to sustain a long duration of growth.
With its leading competitive positioning in cybersecurity, the growing threat landscape (which is also driven by the advancements in AI, making hackers more dangerous), its unique lightweight, single-agent, architecture, and its platform approach, we retain conviction in CrowdStrike, which is emerging as the security platform to beat in terms of scale, profitability, and free cash flow conversion.”
Overall, CRWD ranks 6th on our list of Jim Cramer Thinks These 10 Stocks Deserve Your Attention. While we acknowledge the potential of CRWD, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than the ones on our list but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.