1 Unstoppable Artificial Intelligence (AI) Stock to Buy in November Takeover Punch

cyber security giant CrowdStrike (NASDAQ:CRWD) It will report results for the third quarter of fiscal 2025 (ending October 31) in late November. The report will give investors a new look at how the company weathered the disastrous July 19 outage that knocked 8.5 million computers offline worldwide and cost some of its top customers a combined $5 billion.

CrowdStrike shares fell 44% after the outage, but it has already regained half of that loss because the results were not as bad as analysts expected. That’s why the company’s quarterly results are accelerating the recovery, making the stock a great buy potential in November.

CrowdStrike continues to lead the cybersecurity industry

The outage caused many potential new customers to delay signing contracts, CrowdStrike Chief Executive Officer George Kurtz said in a conference call with investors for the second quarter of fiscal 2025 (ended July 31). But he said the majority of these deals remain in the sales phase, indicating that businesses want to see if the problem persists and how the company will deal with the crisis.

There aren’t many good alternatives to what CrowdStrike offers to its enterprise customers. cyber security industry has a history of fragmentation; This means that vendors often specialize in specific products, causing businesses to assemble software stacks from multiple providers. CrowdStrike offers a holistic cybersecurity platform; This means it protects all aspects of the business. cloud networks from employee identities to endpoints.

CrowdStrike’s flagship Falcon platform offers 28 modules (products) in total. In the second quarter, the company said 65% of its customers used at least five of them. Additionally, the number of agreements signed for eight or more modules increased by 66% compared to the previous year.

CrowdStrike’s holistic approach to cyber protection is tied together by: artificial intelligence (AI) automates everything from threat detection to incident response. The company’s AI models are trained on more than 2 trillion events every day and are becoming more advanced and accurate over time.

CrowdStrike also launched a virtual assistant called Charlotte AI for Falcon last year, and the company says it saves customers an average of two hours per day. Since using one chatbot interface and knows almost everything about an organization’s digital environment, allowing administrators to get answers to customer questions 75% faster. Additionally, Charlotte AI has the ability to generate incident reports independently, reducing the amount of manual investigation required by employees.

Image source: Getty Images.

The outage did not affect CrowdStrike’s long-term revenue forecast

The outage did not have a material impact on CrowdStrike’s Q2 results because the outage occurred less than two weeks before the end of the period. The company generated $963.9 million in revenue in the second quarter; this was actually above the high end of management’s forecast ($961.2 million).

The company did not make any major changes to its forecasts for the 2025 fiscal year, which ends on January 31, 2025. Management now expects to generate $3.9 billion in total revenue, a revised change of just 2.5% from the previous $4 billion.

This is a good indication that CEO Kurtz expects most of the delayed deals in CrowdStrike’s sales pipeline to close. However, when the third quarter report is published, investors need to closely follow any changes in the company’s outlook.

But there’s more evidence that the outage may be nothing more than an outage. CrowdStrike reiterates long-term goal to reach $10 billion annual recurring revenue (ARR) as of fiscal year 2031. Given that the company had ARR of $3.86 billion at the end of the second quarter, this would represent an increase of 159% over the next six years.

CrowdStrike shares could be cheap for long-term investors

CrowdStrike only recently became profitable, reporting its first net revenue in fiscal 2024. Therefore, it is difficult to value the company using traditional methods. price-earnings (P/E) ratio. price-to-sales (P/S) ratio Market cap divided by the last 12 months of revenue may be a better measure of its value.

Based on this metric, CrowdStrike has always been one of the most expensive cybersecurity stocks. It’s trading with a P/S ratio of 21.2, which, while down from its peak of almost 30 before the disruption, is still much higher than the P/S ratio of its largest rival. Palo Alto Networks:

CRWD PS Ratio data Y Charts

However, CrowdStrike deserves a high valuation compared to Palo Alto because it is growing much faster. Palo Alto’s revenue rose 32% in the second quarter, compared with a 12% increase. Unless something else unexpected comes out of the July 19 incident, the valuation gap between the two companies is probably justified.

But for investors, the potential long-term opportunity is even more exciting. If CrowdStrike hits its $10 billion annual revenue target by fiscal 2031, that would put its shares’ forward price-to-earnings ratio at 7.3. If the current P/E ratio maintains 21.2, that means the stock could return 190% between now and then.

This translates to a compound annual return of 19.4% over the next six years; That’s nearly twice the average annual return in the United States. S&P 500 We go back to 1957. In other words, buying CrowdStrike shares can help you beat the market.

Since the stock is still down 23% from its all-time high, a positive third-quarter earnings report could encourage investors to see the worst as over. Therefore, buying in November, before the company’s results, could be an ideal entry point in the long term.

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Anthony DiPizio It has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Palo Alto Networks. The Motley Fool has a feature disclosure policy.